Even Insiders Are Selling Crocs

There is no justifiable reason why anybody would be buying Crocs, Inc. (CROX) at these enormously inflated levels. After all, their core sales are derived from an extremely unfashionable, yet somehow popular foam-like material. The current popularity of the company's footwear begs one question – are current growth rates sustainable? The answer, plain and simple, is No.

Although we cannot argue the impressive progress the company has made until this point, there are several indicators suggesting CROX has reached its peak and will soon begin its downward descent. First and foremost, we should look to insider activity for the sentiment the VIPs at the company have. You will notice that not only have insiders been shedding shares since late last year, but the amount of insider selling in the last few months has more than doubled.

Apparently, insiders are not the only ones that think this growth is unsustainable as nearly 20% of the entire float is held short. More importantly, the run the stock has seen over this past month is artificially inflated, as a number of meaningless press releases have forced short sellers to run for the exits. Just a month ago, nearly 60% of the float was held short, suggesting that this latest run was solely based on a short covering rally, rather than an actual improvement in fundamentals.

The latest news from the company involves their launch of men's and children clothing lines that are manufactured from a similar material as the clogs they sell. What? Can you remember the last time you had the desire to wear a rubber t-shirt? We didn't think so. This is the company's attempt to diversify their business, so their numbers are not solely based on sale of shoes that nothing more than a current fad.

Further, with the winter soon approaching, it is unlikely that people will be actively seeking shoes that have holes in them. Sure the material they use is water proof, but what good are they when there are holes in them to let water seep right in. We anticipate that the popularity of these shoes will not continue.

When this fad is finally played out, not only will consumers be tossing their Crocs in the dumpster, but the stock will be joining them there as well.

Disclosure: Author has a short position in CROX

Comments

[User 106111:]

They have a winter line of shoes that don't have holes in them. Also insiders have been selling all along the way up. It doesn't mean the fundamentals aren't intact. The fact that these shoes are extremely comfortable and appeal to all age groups is a hit in design. I would even buy a pair for myself. Yes these growth rates aren't sustainable but with such a low pe compared to the growth rate the stock has room to move higher easily. But the stock may have huge upside/downside swings in the mean time. Right now the stock is in a short term downtrend after hitting a double top, but be prepared to get out once the downtrend is broken.

2007 Sep 09 11:26 AM

[yourfilled:]

I own the shoes and without the holes they are perfect for winter slush.
I might buy on a dip, but for now I will stick with the shoes. For $30.00
what the heck

2007 Sep 09 01:52 PM

[User 106149:]

Umm, it's not winter in the entire world. Time for some grade school geography Neal. As a resident in the southern hemisphere, I can tell you that CROX are everywhere, including on peoples feet.

2007 Sep 09 05:58 PM

[sharontheli...:]

Sounds like you are just another typical short who unfortunately for you hasn't checked out their winter line up of shoes. I just purchased the Mammoth which is probably the most comfortable shoe I have ever had--Crocs has already sold 1 million of the shoes and it isn't the winter season yet. Although they have hole, the holes are covered underneath by a cozy liner of croslite. So no snow could possible get into the shoes. They also make perfect slippers. I also purchased the Axle which has to be the lightest most comfortable walking shoe ever made. And I am waiting for the Alice and my husband wants to get the Venture. Their web site is so busy you can't even place orders.

Also, half of the world is down under in chance you don't know your geography. When we are having winter, they are having summer. Piper Jaffrey has already said that the Brazil--south of the equator--is coming on very strong to Crocs. So good luck on your short. You are definitely going to need it.

2007 Sep 09 06:22 PM

[sharontheli...:]

Sounds like you are just another typical short who unfortunately for you hasn't checked out their winter line up of shoes. I just purchased the Mammoth which is probably the most comfortable shoe I have ever had--Crocs has already sold 1 million of the shoes and it isn't the winter season yet. Although they have hole, the holes are covered underneath by a cozy liner of croslite. So no snow could possible get into the shoes. They also make perfect slippers. I also purchased the Axle which has to be the lightest most comfortable walking shoe ever made. And I am waiting for the Alice and my husband wants to get the Venture. Their web site is so busy you can't even place orders.

Also, half of the world is down under in chance you don't know your geography. When we are having winter, they are having summer. Piper Jaffrey has already said that the Brazil--south of the equator--is coming on very strong to Crocs. So good luck on your short. You are definitely going to need it.

2007 Sep 09 06:22 PM

[borisb:]

just a collection of incomplete assumptions. i just bought my 3rd pair and have no intention of "throwing them out". i do plan to avoid inflated $100+ plastic Nike kaka sneakers at all cost. Crocs- The highest performing shoe this generation has ever seen might not be a fad. Dont listen to Granda Pa Neal his senility has made him irrelevant.

2007 Sep 09 08:14 PM

[borisb:]

just a collection of incomplete assumptions. i just bought my 3rd pair and have no intention of "throwing them out". i do plan to avoid inflated $100+ plastic Nike kaka sneakers at all cost. Crocs- The highest performing shoe this generation has ever seen might not be a fad. Dont listen to Granda Pa Neal his senility has made him irrelevant.

2007 Sep 09 08:14 PM

[sliman:]

Keep shorting. When you have to buy it back at higher prices it will only move the stock up more. I am long and strong.

2007 Sep 09 09:25 PM

[Constable Odo:]

I just hope you really believe what you are saying about dumping CROX. I'm sure anyone can find out what the insiders are doing. I don't think the shoes would be a favorite of Alaskans or Greenlanders, but for people that live in temperate and tropical zones all year round, I think the footware would do just fine. If you're just talking out of your behind to deceive people so you can make some quick money, I feel sorry for you. Other than my saying that, thanks for the heads up and I'll take it under advisement.

2007 Sep 10 01:24 PM

[Scott Weitz:]

Aside for my comments for VOIP, I've got some other reasons to think twice about crocs.

1) Saw some great CROCS knockoffs at the mall the other day for 12.95....they were identical to Crocs....increased competition is never good.

2) Is it just me, or are the winter shoes hideous?! Not that the summer crocs aren't hideous, but at least the summer models can be worn by kids and have some 'flair'. I can see why kids would love them. Of course this is just an opinion, but I think the winter models will only be purchased by the crocs loyalists and will not have the broad appeal of the summer models.

2007 Sep 11 10:21 PM

[Love to short:]

CROX just dropped below 5.00! Great call, justice has been served.

2008 Jul 25 03:03 PM