Crocs, Inc. (CROX)’s Turnaround Is Floundering: Time to Look Elsewhere

Hedge your bets

Unfortunately, both Nike and Crocs, Inc. (NASDAQ:CROX) are exposed to the world of branding, which can be a risky business if a PR mistake is made. Without risk of branding and the fickle fashion world, Foot Locker, Inc. (NYSE:FL) appears to offer growth at a reasonable price. With the company’s EPS estimates being revised consistently higher throughout the past year, analysts are extremely bullish on the company. Foot Locker is low-priced on a forward basis, trading at a forward earnings multiple of 11.6 compared to the sector average.

Foot Locker, Inc. (NYSE:FL) does not achieve the same sort of returns as the likes of Coach, Inc. (NYSE:COH) and Nike, which are its sector peers. However, the company generates a return on shareholder equity of 17.5%, only slightly below the sector average. The company has $7.2 in cash per share, and discounting this from its stock price, the valuation looks even more appealing.

Additionally, Foot Locker, Inc. (NYSE:FL)’s management proactively closed 39 poorly performing stores during the last quarter, with an additional 88 closures planned for this quarter. All in all, these stores will be replaced by 98 new stores and 64 store renovations. The proactive closure and opening of stores shows management’s drive to proactively create shareholder value, and this is showing through in sales and EPS growth – something Crocs is struggling to achieve.

Foolish summary

Overall, it might be time to jump ship at Crocs, Inc. (NASDAQ:CROX). The company is struggling to turn itself around, but it’s haunted by its old image and nature of the Crocs style. Indeed, while management is working hard to improve the situation, there is not showing through in either revenue or earnings growth. On the other hand, Foot Looker presents a hedged, well-diversified play on the apparel sector. Trading at a low valuation, Foot Looker looks attractive and the proactive management team should continue to generate shareholder returns.

The article Crocs’ Turnaround Is Floundering: Time to Look Elsewhere originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Crocs and Nike. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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