Crocs CEO to retire as Blackstone takes $200 million stake

Staff Writer
Columbus CEO

(c) 2013, Bloomberg News.

Crocs Chief Executive Officer John McCarvel will retire and Blackstone Group will invest $200 million in convertible preferred stock as the maker of colorful plastic clogs struggles to regain lost popularity.

The shoemaker will use the funds to increase stock repurchases to $350 million, Niwot, Colo.-based Crocs said in a statement. McCarvel will step down on or about April 30.

Crocs has been trying to revive its fortunes after consumers tired of its trademark clogs, knockoffs cut into sales and U.S. consumer spending slumped. The Blackstone investment comes after Crocs attempted to find a buyer for the whole company, people familiar with the situation said in November.

"We've been unable to repurchase stock while negotiating this transaction, but we now expect to do so beginning in the first quarter of 2014," Jeff Lasher, chief financial officer, said in the statement. The buybacks will reduce publicly traded common stock by about 30 percent, Lasher said.

Blackstone will be restricted from acquiring more than 25 percent of Crocs common shares until a time frame expires for appointing board directors, the shoe manufacturer said in a filing. Crocs will pay $2 million as a closing fee and reimburse as much as $4 million of Blackstone's transaction fees and expenses once the preferred-stock sale is concluded, it said.

McCarvel, who took the helm in March 2010, expanded the company's products to include other styles of footwear and opened new stores. The shares have declined 7.4 percent this year in New York trading, compared with a 29 percent gain in the Standard & Poor's 500 Index.

The board has begun an outside search for McCarvel's replacement, according to the statement.

Calls to the offices of Crocs and Blackstone seeking comment weren't immediately returned outside U.S. business hours.

The preferred shares that Blackstone acquired have a 6 percent cash dividend rate and are convertible to common stock at $14.50 a share, Crocs said.

"We will focus on improving financial performance, particularly in the Americas and Japan, as well as enhancing our global retail execution," Thomas Smach, Croc's chairman, said in the statement. "We may moderate the pace of our investments in new retail stores."

Crocs said it expects fourth-quarter revenue to be at the low end of the previously provided guidance range of $220 million to $225 million. Diluted loss per share will probably be at the higher end of the 20 cents and 23 cents range projected, according to the statement. That compares with the 19 cents-a- share loss average of nine analyst estimates compiled by Bloomberg.

The shoemaker also expects aggregate charges of $47 million to $52 million in the fourth quarter, or an additional loss per diluted share of $0.45 to $0.50, according to the statement. The charges take into account additional costs such as expenses related to the Blackstone transaction and asset impairments.

Further restructuring charges may be necessary in 2014, Crocs said.