Crocs Decimated After Cutting Guidance; Resumes Trading Down 36%

Footwear apparel company Crocs, Inc. CROX was halted on Monday afternoon after the closing bell in order to update its third quarter guidance. The company now sees revenue in a range between $273 to $275 million versus previous guidance which called for revenue of $280 million. In the year ago period, CROX reported revenue of $215.6 million. On the earnings front, the company now expects Q3 EPS to be between $0.31 and $0.33 versus previous guidance of $0.40. John McCarvel, President and Chief Executive Officer, stated: “Our business in Asia has continued to perform very well on the strength of our new product introductions. After a very positive response to our spring / summer 2011 product line in the Americas, we experienced some softness in our consumer direct channel in kiosk and outlet locations. Gross margins on a consolidated basis were slightly lower in the quarter than our initial expectations driven in part by lower direct sales as a percentage of total revenue." The stock reopened trading on Monday down a whopping 36% to $17.00. CROX had been a high flying momentum name prior to slashing its guidance, rising 55% in 2011. At this point, however, it appears as if the stock is completely broken after losing more than a third of its market cap in the wake of the company's updated guidance. The name has broken well below both its 50-day moving average at $26.42 and its 200-day at $24.25. At first glance, it would appear that the initial reaction to this news could be an overreaction, but do not be surprised if CROX heads even lower in the near-term. Given the technical damage done to the chart, and the fact that a lot of fast money, momentum traders are involved in this stock, value hunters may want to wait a few days to let the volatility in the name sort itself out before stepping in on the long side.