Wednesday, April 11, 2007

Calls of Note Part 1

Piper Jaffray raising estimates and price tgt for Crocs (NASDAQ:CROX) to $73 from $70 given their upbeat view of LT growth prospects.After hosting investor meetings with CEO, Ron Snyder, in New York, firm has increased confidence in near- and long-term growth prospects for the Crocs brand on a global basis. The company is actively diversifying its product mix while adding new points of distribution and managing a demand driven operating model. Firm expects the company to report solid FQ1 results and they believe bookings for the summer and fall periods are measuring up to aggressive growth expectations.

Stock-outs at many retailers suggest demand for new spring styles remains high and validates Crocs' strategy to segment the channel by price and product. Classic styles (Beach/Cayman) continue to sell-through on a positive comp basis, evidenced by Y/Y sales trends at mature stores and company owned kiosks. On balance, firm estimates the Beach/Cayman styles will represent near 30% of sales exiting FY07, down from 61% at year-end FY06. Jibbitz tie rates have exceeded initial expectations and licensed properties add regular freshness to the line.

Strong sales trends in European markets are being led by the U.K., Germany, and France. The company is currently operating at roughly 4M units/month in capacity and expects to near 4.5M units by mid-summer. Firm thinks the company's ability to manage demand driven and replenishment order flow while at a similar rate introducing new styles into the marketplace speaks to the flexibility and speed inherent in the global procurement process. Based on this, they think international sales on a run-rate dollar volume basis could exceed domestic sales by year end FY07.

Warm March weather and a strong response to initial shipments of new products likely resulted in a strong finish to FQ1. Firm is raising their FQ2-FQ4 estimates based on increased unit sales assumptions and solid sales momentum. They expect increased investment during the year in store level fixturing, placement, and marketing in an effort to secure year-round floorspace, purported by solid booking trends for 2H style launches. Upside to estimates remains based on the potential for continued strong demand trends, performance of late-FY06 acquisitions, and strong response to new styles and licensed products. Firm is raising PT from $70 to $73, continuing to utilize 30x their revised FY07E EPS of $2.44.

Notablecalls: Expect to see some buying interest in the name.

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