Crocs (NASDAQ: CROX) reported earnings for the fourth quarter after the market close on Thursday. The shares were up almost 10% on the news during the after-hours trading session since the footwear company beat expectations by a wide margin. But let me tell you something: I cannot imagine any sane investor wanting to risk his hard-earned capital on this stock. The numbers are just too dismal.
Wall Street was bracing for a loss of $0.56 per share in the fourth quarter. Well, Crocs did much better than that. It lost only $0.40 per share. Great, right? Yeah. Let's look at the top line: it declined by 43%. Does that put the earnings beat in perspective? I sure hope it does. How about the fact that gross margin went down to 44% compared to 56% in the year-ago period -- does that also lend some context?
Now, let's look at the stock itself. The shares closed on Thursday at $1.21 (although, they rallied up to $1.33 in after-hours). The 52-week low on the stock is $0.79 and the 52-week high is $34.75. The market is doing you a favor here: it's telling you not to speculate. Crocs is not a value. It has simply become a trading vehicle for only the bravest of traders. Listen to the price action on this one.
Sure, the economy has made things rough for Crocs, but come on, it's probably more than that. The fad just isn't what it used to be. Melly Alazraki talked back in November about how the Crocs phenomenon seemed to be weakening. Given the steep drop in the shares over a year's time, and given that this is a company whose fortunes are based on the fickle consumer fashion, I'd say that this is an easy decision: do not give in to the temptation to gamble with Crocs. You just don't know how low it'll sink.
If I had to buy something related with footwear, I'd probably look at a Nike (NYSE: NKE), or a Deckers Outdoor (NASDAQ: DECK) first. Of course, considering the lousy sentiment of the markets, there aren't many stocks that I'm looking at with tremendous confidence, so I'd be careful with those two as well. As for Crocs, it's not even a blip on the proverbial radar.
Disclosure: I don't own any company mentioned; positions can change without notice.