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Crocs closes Quebec plant as footwear fad wanes
The Canadian Press
April 15, 2008 at 3:10 PM EDT
TORONTO Footwear maker Crocs Inc. announced it will close its Quebec factory in July, putting 670 people out of work as the company moves production to Mexico.
Shares of the Colorado-based company were pounded in Tuesday trading after it lowered first-quarter forecasts, blaming fewer sales of its colourful, funky shoes and costs related to the shutdown of the plant.
By midday on the New York Stock Exchange, Crocs shares fell $7.12 (U.S.) to $10.67, a drop of 40 per cent in trading of 35.5 million shares.
Although its Canadian manufacturing plant will close, Crocs will keep open its sales and marketing office and retail store in Quebec City. It will also open four additional Crocs branded stores this year.
A rainbow coloured selection of Crocs are seen at a Whole Food Store in Cambridge, Mass., in this file photo from 2005. (NYT)
Crocs Inc.
A one-year look at Crocs' share performance.
Crocs Inc.
By midday on the New York Stock Exchange, Crocs shares fell $7.12 (U.S.) to $10.67, a drop of 40 per cent in trading of 35.5 million shares.
The company said 262 people had already been laid off and the rest will lose their positions by the end of July.
The Teamsters union representing Quebec's Crocs workers was not ready to concede that closure of the plant is inevitable.
We are meeting with factory management later today or in the next few days. Hopefully the government will help us as well, said Stephane Lacroix, director of communications for Teamsters.
When we're talking about research, development and innovation, we think we can compete.
Crocs will be able to meet its North American needs through a flexible manufacturing operation in Mexico, chief executive Ron Snyder said in a conference call Tuesday.
That's a very vertically integrated factory, where the Canadian facility didn't have all of those capabilities, Mr. Snyder said.
He said it makes sense to consolidate all manufacturing in North America in a lower-cost factory capable of producing both sewn and moulded products as well as compounding its own raw materials.
While it was a difficult decision to close down our manufacturing facility we believe it was necessary in order to improve our cost structure going forward, Mr. Snyder said.
Crocs cut its first-quarter revenue estimate to between $195 million and $200 million, from previous guidance of $225 million. Analysts had predicted revenue of $223.3 million.
The revised forecast will translate into an increase of 37 per cent to 41 per cent in revenue over the previous first quarter, with domestic sales up 13 per cent, European sales rising about 90 per cent and Asian sales 75 per cent higher, the company said.
For the fiscal second quarter, Crocs expects diluted earnings per share between 42 cents and 47 cents, or 45 cents to 50 cents, excluding a three-cent charge for closing the Canadian plant. Analysts had expected a profit of 79 cents per share.
For fiscal 2008, Crocs expects a profit of $1.54 to $1.64 per share, or $1.70 to $1.80 excluding one-time charges. Analysts had predicted a profit of $2.63 per share.
Based north of Denver, Crocs was founded in 2002 by three Boulder businessman who wanted to market an unusual resin shoe developed and manufactured by Foam Creations Inc.
The shoes made of a proprietary closed-cell resin material that comes in multiple colours feature holes scattered across the top and around the toes. The company went public in February 2006.
Quebec has been hit hard by the high Canadian dollar, which has squeezed its exports, as well as troubles in the lumber industry, which have led to closures of mills and factories, with the loss of thousands of jobs.
Last month, The Men's Wearhouse Inc., a U.S. specialty clothing company that owns 116 Moores stores in Canada, announced it will eliminate 540 jobs as it closes its manufacturing plant in Montreal this July.
The Houston-based company said the streamlining is the result of a high Canadian dollar and intense competition in the specialty clothing business from overseas rivals in Asia and elsewhere.
At Crocs, the market has worsened as the U.S. economy gets weaker.
Retailers in general are planning more cautiously, Mr. Snyder said in a statement, adding that Crocs did not have the level of business it originally expected. In addition, because of our current expense structure, a shortfall in sales versus our expectations disproportionately impacts our earnings results
The Canadian Press
April 15, 2008 at 3:10 PM EDT
TORONTO Footwear maker Crocs Inc. announced it will close its Quebec factory in July, putting 670 people out of work as the company moves production to Mexico.
Shares of the Colorado-based company were pounded in Tuesday trading after it lowered first-quarter forecasts, blaming fewer sales of its colourful, funky shoes and costs related to the shutdown of the plant.
By midday on the New York Stock Exchange, Crocs shares fell $7.12 (U.S.) to $10.67, a drop of 40 per cent in trading of 35.5 million shares.
Although its Canadian manufacturing plant will close, Crocs will keep open its sales and marketing office and retail store in Quebec City. It will also open four additional Crocs branded stores this year.
A rainbow coloured selection of Crocs are seen at a Whole Food Store in Cambridge, Mass., in this file photo from 2005. (NYT)
Crocs Inc.
A one-year look at Crocs' share performance.
Crocs Inc.
By midday on the New York Stock Exchange, Crocs shares fell $7.12 (U.S.) to $10.67, a drop of 40 per cent in trading of 35.5 million shares.
The company said 262 people had already been laid off and the rest will lose their positions by the end of July.
The Teamsters union representing Quebec's Crocs workers was not ready to concede that closure of the plant is inevitable.
We are meeting with factory management later today or in the next few days. Hopefully the government will help us as well, said Stephane Lacroix, director of communications for Teamsters.
When we're talking about research, development and innovation, we think we can compete.
Crocs will be able to meet its North American needs through a flexible manufacturing operation in Mexico, chief executive Ron Snyder said in a conference call Tuesday.
That's a very vertically integrated factory, where the Canadian facility didn't have all of those capabilities, Mr. Snyder said.
He said it makes sense to consolidate all manufacturing in North America in a lower-cost factory capable of producing both sewn and moulded products as well as compounding its own raw materials.
While it was a difficult decision to close down our manufacturing facility we believe it was necessary in order to improve our cost structure going forward, Mr. Snyder said.
Crocs cut its first-quarter revenue estimate to between $195 million and $200 million, from previous guidance of $225 million. Analysts had predicted revenue of $223.3 million.
The revised forecast will translate into an increase of 37 per cent to 41 per cent in revenue over the previous first quarter, with domestic sales up 13 per cent, European sales rising about 90 per cent and Asian sales 75 per cent higher, the company said.
For the fiscal second quarter, Crocs expects diluted earnings per share between 42 cents and 47 cents, or 45 cents to 50 cents, excluding a three-cent charge for closing the Canadian plant. Analysts had expected a profit of 79 cents per share.
For fiscal 2008, Crocs expects a profit of $1.54 to $1.64 per share, or $1.70 to $1.80 excluding one-time charges. Analysts had predicted a profit of $2.63 per share.
Based north of Denver, Crocs was founded in 2002 by three Boulder businessman who wanted to market an unusual resin shoe developed and manufactured by Foam Creations Inc.
The shoes made of a proprietary closed-cell resin material that comes in multiple colours feature holes scattered across the top and around the toes. The company went public in February 2006.
Quebec has been hit hard by the high Canadian dollar, which has squeezed its exports, as well as troubles in the lumber industry, which have led to closures of mills and factories, with the loss of thousands of jobs.
Last month, The Men's Wearhouse Inc., a U.S. specialty clothing company that owns 116 Moores stores in Canada, announced it will eliminate 540 jobs as it closes its manufacturing plant in Montreal this July.
The Houston-based company said the streamlining is the result of a high Canadian dollar and intense competition in the specialty clothing business from overseas rivals in Asia and elsewhere.
At Crocs, the market has worsened as the U.S. economy gets weaker.
Retailers in general are planning more cautiously, Mr. Snyder said in a statement, adding that Crocs did not have the level of business it originally expected. In addition, because of our current expense structure, a shortfall in sales versus our expectations disproportionately impacts our earnings results
