What: Footwear designer Crocs' stock jumped higher by 14% in May, according to S&P Capital IQ data. Shares are now 50% above the 52-week low of $10 set in February, however, the stock is still 50% below the record high long-term shareholders enjoyed in 2011.
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So what: Crocs' stock rose after the company posted first-quarter earnings results showing signs of momentum in the business. Yes, sales shrank by 8% to $262 million. But that result was right within management's forecast: The company projected an up to 10% revenue dip back in February, mainly due to its struggles in China.
But management said at the time that it saw the business swinging back to growth over the next three quarters of 2015. "We expect the declines to moderate substantially in [the second quarter] and growth to return in the second half of 2015 as many of the strategic changes we implemented in late 2014 positively impact the business," CEO Gregg Ribatt said in a February press release.
Now what: Crocs' progress in its China business could lay the groundwork for that market to stop sapping results soon. "We have closed stores [in China], cleaned up distribution, and moved through excess inventory," company President Andrew Rees said in a conference call with analysts.
Meanwhile, Crocs' new focus on its core footwear products has already yielded a few quick hits. The retailer's "Freesail" clog and "Sloane" sandal are selling briskly. "We are very excited about the broader opportunities these shoes represent and our ability to continue to evolve a core molded footwear business in the future," Ribatt said during the call.
Executives' updated forecast calls for more stabilization ahead. Second-quarter sales should come in as high as $350 million, enough for slight growth -- excluding the drag from discontinued China operations.
The article Why Crocs Inc. Stock Rose 14% in May originally appeared on Fool.com.
Demitrios Kalogeropoulos owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Crocs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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