Unloved Crocs Still Has Bite

Abroad, however, I expect Crocs' business to explode. The rest of the world is just catching on to the utility and value of the basic water clog. With a cheap currency, Crocs can sell its European shoes for 10 euros wholesale. At that price, the product becomes virtually disposable. In Asia, Crocs are on fire in Japan, and China is just opening up. At $30 a pair, Crocs represent an affordable American-brand luxury for many emerging-market consumers. If Crocs executes well, its China market could dwarf its U.S. market in a few years.

Few analysts and investors appreciate that Crocs is a highly creative, global company with 55% of its sales abroad last quarter. And those foreign sales are growing between 50% and 100% on a year-over-year basis. Few U.S. shoe companies have such rich foreign exposure to such large untapped markets. In 2009, it is conceivable that both Europe and Asia will each surpass the U.S. in sales and profits for Crocs. Remember, global exposure, even consumer exposure, is still good these days.

Caveats on the Clogs

Now, Crocs does have some challenges. The domestic retail market is sloppy. A cool, wet spring left the company with too much inventory. And the copycats are out in force in the molded-shoe business. Crocs is not a stock for widows and orphans.

But I expect the new fashions to change the game competitively. And the company can put a bunch of the basic product into the exploding international channel. Starting in the June quarter, I expect Crocs to show a significant decline in inventory with stunning foreign sales growth. That would help the company meet or beat Wall Street expectations. And the shorts will be forced to cover at much higher prices.