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Piper Jaffray is positive on Crocs (NASDAQ:CROX) following two days of meetings with management. Crocs addressed concerns including near-term sales rates, inventory levels, distribution segmentation, pricing, and margin sustainability. While it is reasonable to assume that U.S. sales growth is moderating (as modeled) and international sales are accelerating, PJ thinks the company is taking steps to further balance production and inventory levels heading into its peak selling season. At the same time, the global infrastructure is being fine-tuned to best maximize efficiency and minimize cost in order to preserve margin during all economic cycles.

JP is comfortable with its $225M (v. $230M Street) top-line estimate in FQ1, given evidence of more conservative inventory planning at the retail level. Crocs continues to work toward a higher pre-book rate near 40% (v. ~20% LY), with the balance of sales being derived from in-season deliveries.

Approximately 70% of current inventory on hand is aligned with the company's top seven selling styles where fashion risk is low and, over time, future orders will be placed against existing inventory. By flexing and contracting capacity utilization based on sales, they think the company can sustain mid-50s gross margin long-term.

Depreciation in CROX shares of late, they believe, is a result of an exhausted shareholder base, lack of clarity around sales & inventory relationship, and anxiety with respect to fad speculation. As they revisit their model, the firm remains comfortable with current assumptions, believing that underlying demand remains firm and growth rates are reasonable.

They reiterate Buy and $67 target. CROX remains on the Alpha List.

Notablecalls: I very much like this call. The stock has been destroyed lately but Piper does a good job explaining why/how things could be getting better. This is the type of note that will bring nice gradual buy interest. The focus is on the inventory/booking comments.

Short interest still stands at 30%+

I'm almost tempted to call this one Actionable.

Source: Crox Could Rise on Piper's Inventory Comments