The auditor of Crocs Inc says it has 'substantial doubt' about the shoe company's ability to stay in business amid falling revenue. -- ST PHOTO: JOSEPH NAIR
NIWOT (Colorado) - THE auditor of Crocs Inc says it has 'substantial doubt' about the shoe company's ability to stay in business amid falling revenue.
Crocs disclosed the opinion of Deloitte & Touche LLP in an annual report filed on Tuesday with the Securities and Exchange Commission.
FACING THE DOWNTURN
Through the end of 2007, Crocs grew so quickly it had difficulty meeting demand for its colourful, lightweight shoes, the company said in the SEC filing. It boosted production capacity, warehouse space and inventory, but revenue growth slid in 2008.
It had about 3,700 employees at the end of last year, down from 5,300 a year earlier. It also closed manufacturing facilities in Brazil and Canada last year.
'It's a really serious sign the company has some financial difficulties ahead,' said Chris Hughen, associate professor of finance at the University of Denver's Daniels College of Business.
Still, he didn't expect the company would die. 'If they can right-size the company, the company will survive,' he said.
A Crocs spokesman didn't immediately return a phone message on Wednesday.
Crocs, which had ramped up for strong international and product growth only to watch sales drop last year, said it needs to find a cost structure that its revenues will support. The company lost US$185.1 million (S$280 million) last year as revenues fell almost 15 per cent to US$721.6 million.
The number of footwear units sold fell 24.7 per cent over the year, the filing said. The company blamed deteriorating global economic conditions, falling demand and difficulty marketing its expanded product line.
Crocs said it must secure financing and maintain enough liquidity to pay obligations. It said it has US$22.4 million in borrowings under a loan that matures April 2. As of Dec 31, it had US$51.6 million in cash and cash equivalents. -- AP
