Crocs to lay off 600 in Canada after cutting profit, sales forecasts
Crocs Inc., maker of the namesake colorful clogs, said it would fire its 600 Canadian plant workers after lowering annual earnings and sales forecasts as consumer spending slowed.
Shares of Niwot, Colo.-based Crocs tumbled more than 29% in extended trading after the earnings report was released.
The shoemaker will close its Quebec City factory to reduce expenses, spokeswoman Tia Mattson said. About 100 sales and marketing positions will remain in the region, where Crocs plans to continue retail expansion, she said. Sluggish consumer spending has prompted retailers to slow orders of Crocs shoes, hurting sales. Crocs employed 5,300 at the end of last year.
“The retail environment in the U.S. has become increasingly challenging as consumer spending and traffic levels have slowed,” Chief Executive Ron Snyder said in a statement.
Shares of Crocs tumbled $5.19 in after-hours trading after closing down 16 cents at $17.79 in the regular session. Crocs almost tripled in its first year of trading on the Nasdaq Stock Market. The shoemaker went public in February 2006 and posted sales that more than doubled in each of the next seven quarters. This year, the company is forecasting 15% to 20% growth, while analysts surveyed by Bloomberg were estimating a 37% gain.
“The magnitude of the miss is the surprise here,” said Jeff Mintz, an analyst in Los Angeles with Wedbush Morgan Securities, which rates the company “strong buy.” “The shoes are here to stay, but this is a sign the growth in the company has slowed significantly, slower than what we expected.”
Crocs, whose trademark crocodile is carried on about 250 different styles, is known for its colorful clogs with holes. It introduced new products for the spring that included a new heel as well as updated fashions and expanded children’s lines.
The shoemaker uses a proprietary foam-like resin, called Croslite, as the main material for all of its shoes. The resin can be mixed with a wide variety of colorants to create a vibrant palate.
The shoes, which are sold through department and sporting goods stores as well as other retailers, range in price from $24.99 to $79.99.
Crocs sells shoes in about 90 countries and gets about half of its sales from overseas. Overseas sales more than tripled in the fourth quarter to $109 million.
In the last six months, Crocs has dropped 12% or more six times on a daily basis as the company has posted sales and profit forecasts that have disappointed investors.
The shutdown of the Canadian plant will contribute to a first-quarter loss of as much as 5 cents a share, Crocs said. Revenue will be as low as $195 million for the quarter. The company previously forecast profit of 46 cents a share on revenue of $225 million.
