Why Crocs' Shares Leapt
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of shoe seller Crocs (NAS: CROX) proved that they still have some bite, as they took off after the company reported second-quarter results, gaining 17%.
So what: We've heard it over and over again. Some company or another has an opportunity to expand in Asia. In many cases, the claim seems to ring hollow -- misdirection, so that investors don't think about lackluster results elsewhere. What can we make of Crocs' excitement over -- as CEO John McCarvel put it -- "continued strong growth in Asia?" Well, I have to admit, it looks like they're on to something.
Believe it or not, during the second quarter, it was in Asia, not the U.S., that Crocs did most of its business. Tally it up, and the company's Asia sales totaled $147 million during the three-month period, while sales in all of the Americas were $135 million. Year over year, Asia growth was also better, rising 21% versus the 12% boost in the Americas region.
Oh yeah, and overall, the company managed to deliver $0.68 in earnings per share, which was easily ahead of Wall Street analysts' average estimate of $0.61.
Now what: Notably, the majority of the company's Asia sales take place through the wholesale channel, while it's the consumer-direct and internet channels that do most of the business in the Americas. That means that the business in China still may not be as profitable as that in the Americas. The company hasn't provided the numbers (that I've seen) to show that that's definitely the case, but it seems a reasonable assumption.
But there's little doubt it's that geographic segment of the business that investors should be watching going forward. Over the past year, Crocs has opened a net 58 new stores in Asia, while it's expanded by a mere (net) five new stores in the Americas.
Want to keep up to date on Crocs?Add it to your watchlist.
The article Why Crocs' Shares Leapt originally appeared on Fool.com.Motley Fool newsletter services have recommended buying shares of Crocs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferdoes not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter@KoppTheFoolorFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.