Market Overview

Goldman Sachs Initiates Coverage on Crocs and Other Shoemakers


Goldman Sachs initiated coverage on Crocs (NASDAQ: CROX) Tuesday, along with several other footwear purveyors including Foot Locker (NASDAQ: FL), Decker Outdoors (NASDAQ: DECK) and Steven Madden (NASDAQ: SHOO).

Goldman prefers Crocs and Foot Locker due to their near-term earnings and large cash reserves. They anticipate that Crocs and Foot Locker will uphold their agreement with shareholders in distributing dividends and share buybacks. The report is also neutral on Decker Outdoors and recommends investors sell Steve Madden. Preferring more athletic-oriented brands to those that rely on fashion, it notes that Steve Madden is at full valuation, peak operating metrics, and fashion dependence. The downside risk is disproportionate to that of the group average.

Goldman Sachs is hot on Crocs because they believe it has outgrown its roots as a U.S. footwear fad. Crocs is now a $1 billion brand that is expanding across the world. For the past 30 days, Crocs has fluctuated from as high as $13.23 share (current as of mid-day trading on Tuesday, November 27) and as low as $12.03 per share. Crocs is also down 9.6% from its price one year ago.

Goldman expects Crocs to initiate some large-scale stock repurchases, which is the direction management has leaned in recent times.

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