Crocs' Solid Guidance Triggers Short Squeeze

The Niwot, Colo.-based designer of distinctive footwear made from its proprietary Croslite plastic reported a first-quarter loss of five cents a share, vs. a profit of 31 cents a year ago. The cost of closing a factory in Canada took a heavy toll. Absent the restructuring charges, Crocs' earnings were nine cents a share. Wall Street analysts expected 10 cents.

The company, which as of Wednesday had lost nearly 90% of its value from its Oct. 31 record close of $75.21, also affirmed its second-quarter and full-year guidance, bolstering hopes that it has reset Wall Street's expectations.

For the second quarter, Crocs Chief Financial Officer Russ Hammer said the company expects revenues to increase approximately 10% to 15%, with earnings of 45 cents to 50 cents a share. Gross margins should be between approximately 45% and 56%.

Prospects for all of 2008 remain steady as well, the CFO said, with expected revenue growth between 15% and 20% and earnings in the range of $1.54 to $1.64 a share including restructuring charges.

Crocs Chief Executive Ron Snyder said the company cut its earlier guidance on April 14 to help renewed expectations.

"This was primarily due to the challenging domestic retail environment and its negative effect on our projected level of at-once business," Snyder said on a late Wednesday conference call. "Based on our first-quarter results, combined with the macroeconomic trends and a generally challenging marketplace, we believe it was prudent to adopt a more conservative outlook for the remainder of this year, and adjusted our fiscal 2008 projections accordingly."

Sales for the quarter were $198.5 million, compared with $142 million a year earlier, an increase of 40%.

When the bouncing stops, though, there are some reasons to give this stock another look.

As of April 10, the most recent date for which data are available, 39% of Crocs' public share float was held short, an unsurprising state of affairs considering its price collapse since its Oct. 31 peak. Missing by a penny wasn't great news, but the company's ability to regroup and reaffirm guidance was devastating for short-sellers. They likely helped drive shares to a $12.50 intraday peak before fundamentals started factoring into investor considerations.