Catch Crocs

Crocs (CROX - $43) - These guys may make some of the ugliest shoes in the world, but they are also one of the fastest growing and most profitable companies ever. Look at this sales growth. 2004 sales - $13.5 million. 2005 sales - $108.5 million. 2006 sales - $354.7 million. The estimate for 2007 is for sales of $686 million. Longer term, at least one analyst thinks they have potential to get up to $3 billion in annual sales. How do they do it? Crocs' proprietary closed-cell resin, called Croslite™, enables them to produce a soft and lightweight, non-marking, slip and odor-resistant shoe that are popular with all ages & genders. They have also entered into licencing deals with NASCAR, the NFL, Disney, Nickelodeon, Marvel & various Universities. At a mere $30 a pair, many people buy several pairs to fit their mood (they are now selling 5 million pairs a month). Interestingly, Crocs' "Croslite" technology is not patented, but instead is a trade-secret. The reason they didn't get a patent is so they wouldn't have to share the magic formula and manufacturing process with imitators...much like the recipe for Coke (very smart in my view). People who spend a lot of time on their feet like kitchen staff & nurses live in these things. Kids beg parents to customize their shoes with little $2.50 charms called Jibbitz (Crocs bought this accessory company last year).
Earnings estimates should keep going up along with price targets...this could happen after the recent conference where they announced the new fall line-up with some higher price points and more fashionable shoes. There is also likely to be more Wall Street coverage and support as the company has now passed fad status in a big way. I live in Baltimore and have a friend who works at Under Armour...they just lost a key design person to Crocs. The current highest earnings estimate for 2008 is $4 (meaning the stock sells at just 21x the current est.) I think they have potential to earn $4.50-5 next year. They have beaten earnings est. by an average of 37% the last 4 qtrs. More importantly, they are still being conservative on guidance in my humble opinion. As of May 10th - 25% of the float was still short (what a nightmare for those betting against these guys so far). On factor that doesn't get a lot of attention is, they have a lot more opportunity outside of the U.S. than most currently realize (they currently sell in 70 countries and this is the fastest growing part of the company). See "Think Global" article below. I caught the move from $47 to $70 but feel it is time to get back in this stock. The stock will split 2-1 on June 15th.