3 cases for CROX

Crocs (CROX), known of its quirky, "ugly" clog-like sandals, the almost forgotten "hype" has seemed to make a come-back, in a different way, in a better way. The share price reached a new 52-week-high at $14.72 on Friday.

As a long-time follower of its stock since its IPO, and also a long-term fan of its product (I bought each one of my whole family members a pair of crocs and they love it!), I bring to you 3 cases for renewed optimism in the company:

1. High gross margin
I once had feared that the shoes might become just another commodity after the company used up its quirky brand power. By then, it would be hard for it to maintain high gross margin as it might have to lower the price point to compete with peers and more importantly, the knock-offs. However, CROX's management has averted this fate by employing supply-chain efficiency (e.g. moving distribution centers close to the target market) and introducing new, higher margin products. The gross margin in the second quarter of 2010 was a jaw-dropping 57.8%. In addition, the company managed to raise the average price to $17.76, up 12% from last year.

2. Expanded product lines
Before the financial crisis that almost announced the demise of the company, the former management had already had the plan of diversifying the product lines as this step was crucial to the sustainability and consistency of this once-one-trick-pony. The company now has gone from less than 25 styles/models to 250 models including a nice collection of warmer weather shoe wear and women's high-heels and pumps. The percentage of total revenue carried by the core products has dropped to 21%. Although colder seasons are still the weak spot for the company, it is on track to become a full-fledged shoemaker which will further strengthen its brand building.

3. Direct-to-consumer retail approach
Since the turmoil of the economy and also the company in 2007, the management has focused on switching more emphasis to direct-to-consumer channel from its previous wholesale approach. The company now runs 363 company-operated stores Not only does this approach vital to its future of brand-building, it also plays a crucial role in keeping the high gross margin.

In sum, CROX has emerged from its abysmal in a stronger way. Diversified products, prudent cost and inventory control and direct-to-consumer channel have led to and will continue to lead to more sustainable growth.

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.


Disclosure: The blog author owns CROX in her personal account as of October 9, 2010.

Retail Sales in August

The most recent retails sales report released by the Department of Commerce suggested that there is no sign of double dip in the economy. The report counts receipts of stores that sell durables and non-durables.

Retail sales in August beat the median forecast of 0.3 percent with components more positive than not. Overall retail sales in August continued to improve, gaining 0.4 percent, following a 0.3 percent rebound in July.

Among the gainers are gasoline station sales (up 1.9 percent),  food & beverages (up 1.3 percent) and clothing (up 1.2 percent), health & personal care, sporting goods & hobby stores, general merchandise, nonstore retailers, and food services & drinking places.


Among the losers are 1.1 percent fall in electronics & appliances and a 0.9 percent decline in miscellaneous stores. Motor vehicle & parts dealers decreased 0.7% while furniture & home furnishings slipped 0.5 percent. Building materials and garden equipment sales were flat.

Healthcare Reform Part II

In my previous write-up on this topic, I talked about inclusion of preventive services. Today, I’ll discuss including children with pre-existing conditions into the health-care system. According to a new report , there are 5 million children under the age of 18 who has pre-existing conditions. So far, insurance companies had been denying coverage to people with pre-existing conditions. The Affordable Care Act recognized the need for brining in all those children with pre-existing conditions into the system. So accordingly, health plans beginning on or after September 23, 2010 for new plans and existing group plans, “The new law includes new rules to prevent insurance companies from denying coverage to children under the age of 19 due to a pre-existing condition.”


Now the law says that from this year no children should be denied coverage because of pre-existing conditions.

This is a very good step to consumer protection. But there are some loopholes in this law. The law states that children cannot be denied coverage because of pre-existing conditions, but it did not say that all children need to be covered. So, insurance companies can stop offering coverage to these children till 2014, when everyone need to be offered insurance. Anticipating that the insurance companies would read through these fine prints, the Health and Human services announced a Pre-existing Condition Insurance Plan that will “offer coverage to uninsured Americans who have been unable to obtain health coverage because of a pre-existing health condition”.

So will this provision of Health-Care Reform help the consumers?

The actual benefits will be delayed till 2014 for sure.

http://www.familiesusa.org/resources/newsroom/press-releases/2010-press-releases/pre-existing-national.html
http://www.healthcare.gov/law/timeline/index.html
http://www.hhs.gov/news/press/2010pres/07/20100701a.html



by Roy Tutu


About the author:

Roy Tutu is the publisher of the blog, “ephemeralthinking.com” – a blog that covers topics related to economics, business, society and entertainment.

Roy is an economist with a passion for writing. According to Roy, “our informal conversations leap from one topic to another, transforming and reshaping our views and opinions. Ephemeralthinking.com is an avenue that brings in such informal discussions to curious readers.”

Contact Roy Tutu at roytutu@ephemeralthinking.com