The Crocs (CROX) quarter was definitely not worth writing home about. There were high expectations from the company, but investors were disappointed and the stock is down $35 in one day. Granted they did not crush expectations, but earnings were still good. Revenues of $256.3 million, vs. $111.3 million a year ago and earnings were 66 cents per share, vs. 27 cents a year ago. Demand in some markets were too high and Crocs could not make their product fast enough.

While brand dilution is a possibility considering companies like Sketchers and Payless are selling knock offs, exclusive licensing deals from colleges and companies like Disney will keep them "unique". Moreover, new products will take some seasonality out of their earnings and overseas expansion continues to flourish.

Crocs is like Deckers (DECK), another footwear manufacturer made popular by their Ugg brand shoes. That stock fell out of favor between Dec 2004 and Nov 2005, when it fell from $48 to $17 after a huge run from $3 to $47 between 2002 and 2004. Currently, DECK is a $145 stock and investors who sold it back in Dec 2004 would be kicking themselves.

I believe Crocs will be ok in the long run. If you own it and rode it all the way down, I recommend keeping it. Its too late to sell. If you don't own it, probably best to give it some time. I bought the stock in the mid-thirties myself and sold 50% of my position before earnings. So, while I am still up on the stock, I am not in the black as much as I would have liked. This is a lesson to those who try to guess which way high flyers will go after earnings, and this is why I wrote a piece last week about not buying a momentum stock before earnings. For every Intuitive Surgical (ISRG) and Bidu (BIDU), there is a Crocs and a Las Vegas Sands (LVS). For investors who followed my advice on Crocs back in July, or in Sept, you are either still up on the stock or breaking even. Its time to take a step back from the stock. Don't buy more and don't sell.


-- Faisal Laljee
Dull Disclosure: I am long CROX but my position can change anytime without notice.