Disclosures

Crocs, Inc.

I, Mitchel Kummetz , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
  • B. Riley & Co., LLC makes a market in the securities of the company covered in this report.
Disclosure Chart

Initiated Coverage on 05/21/2015 with a Neutral Rating and Price Target of $16.00

Ratings Distribution as of April 27, 2017
Rating Number of Companies Percent of Total Number of Companies with
Investment Banking Relationships
Percent of Total
Buy 161 67.4% 25 10.5%
Neutral 77 32.2% 0 0.0%
Sell 1 0.4% 0 0.0%
Total 239 100% 25 10.5%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect "Buy" rated stocks to materially outperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly attractive.
  • Neutral: We generally believe "Neutral" rated stocks will perform roughly in line with the S&P 500 and Russell 2000 over the intermediate and long term.
  • Sell: We generally expect "Sell" rated stocks to materially underperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly unattractive.

Risks and Considerations

  • Acquisition/Integration - The Company actively evaluates potential acquisitions as part of its growth strategy. Acquisitions pursued by the Company could be dilutive to financial results and result in a difficult, dilutive or expensive integration.
  • Commodity Costs - Should commodity prices for the Company's resources increase, the Company's operating margins could be harmed.
  • Competition - The industry is highly competitive and many of the Company's competitors have greater resources.
  • Currency Exposure - Since the Company purchases its finished goods from foreign manufacturers and sell its products in transactions denominated in U.S dollars, a weakening of the U.S dollar could negatively impact the Company.
  • Cyclical Nature of the Company's Business - Revenue from the Company's businesses have historically correlated positively with both US and world GDP. A cyclical downturn in GDP growth domestically and/or abroad may lead to a material deterioration in the Company's results.
  • Discretionary Spending - The products the Company sells are largely discretionary in nature and any slowdown in consumer spending would have an unfavorable impact on the Company.
  • Distribution/Sales Dependency - The Company relies heavily on its indirect sales channel for much of its sales. A loss of a major distributor or changes in a distributor's payment practices could prove to be detrimental to future sales growth.
  • Economy - Macro-economic issues such as increasing oil and gas prices and a possible drop in consumer spending could have a negative impact on the Company's business.
  • Execution - Management may not execute well on its restructuring efforts as it allocates capital and human resources towards acquisitions and related integration, possibly resulting in lower margins and cash flow.
  • Financial Results - Unpredictable timing of customer orders.
  • Freight costs - Increases in freight costs caused by high gasoline prices or other factors could cause margin erosion or lost market share if the Company raises prices.
  • Growth Plan - There are many factors that may impact the company's ability to achieve its stated growth objectives.
  • International Operations - The Company derives a significant portion of its revenues from outside the United States. The Company is subject to foreign exchange risk and the risks inherent in managing a global Company.
  • Inventory risk - Depending on market conditions, the Company's gross margins could come under pressure if market prices quickly fall within a three to five week time frame.
  • Labor - The Company has a large number of full-time employees and is party to several collective bargaining agreements that cover some of these employees. Additionally, the Company is facing rising labor costs.
  • Loss of Key Personnel - In our opinion, the current management team will be instrumental in executing the Company's growth strategy. The resignation of a key member of management would have a negative impact on the Company.
  • Operating leases - The Company is subject to significant lease liability. Should results deteriorate and the Company be forced to close stores, cash costs to get out of leases could be considerable.
  • Pricing Pressure - The Company's business could be affected by pricing pressure within the market.
  • Product Concentration - A large percentage of the Company's revenues are from one line of products. Any weakness in those sales would have a significant negative impact on the Company's results.
  • Product/Design - The Company's business is subject to the same elements of general fashion/trend risk as that of any apparel brand/retailer.
  • Retail Store Turnaround - The Company has under taken comprehensive turnaround initiatives, which may take time to positively impact results.
  • Seasonality - The Company's results are highly seasonal.
  • Sector Rotation - Despite the decline in valuations for small- and mid-cap bank stocks relative to a year ago, pricing multiples for small-cap banks remain high compared to the S&P 500. Accordingly, the trading price of the Company's common stock may be vulnerable to any sector rotation that might occur.
  • Weather - The weather can significantly impact the Company's results.
  • General Industry - The Company could miss our estimates and/or their financial guidance.
  • Further Potential Risks - See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.