CROX - another current Asensio target. Asensio has been a terrific resource for a lot of great short ideas, so - naturally - I looked into CROX after the reports were published recently.
Quite frankly, it didn't interest me that much as a short...at first. It seemed that the entire thesis behind the bear case involved overvaluation and the fact that it was a passing fad. Unless there is a compelling case of fraud or criminal conduct (example REFR or KFX) I don't bother.
Nonetheless, I was curious. As I live in South Florida, and it was a beautiful, hot weekend...I decided to do a little casual market research in the malls and on the beach.
I must have stared at thousands of feet. Over the course of three days, I saw exactly 6 people wearing Crocs sandals. Four of them were kids. I found Crocs for sale at some small shoe boutiques and at Sports Authority (chain sporting goods store). The displays were relatively small compared to other shoe lines...and I can assure you there weren't swarms of customers clamoring over the shoes. In fact, I was the only customer browsing at the shoes in every store I visited.
The shoes themselves are simply soft plastic sandals with ventilation holes and in bright colors. They are comfy. Probably good for the beach. I could see where they would be cute for little kids. I asked the salespeople about how the shoes have been selling and they all said that they were a very popular item (especially with male college students and girls under 13)...but that the fad seemed to be fading (it was a bit hotter a few months ago).
I also noticed that other shoe retailers had Crocs knockoffs that looked exactly the same and retailed for about 10 or 20 bucks less.
So from my initial, casual research...I have to agree with the Asensio report. The company IS grossly overvalued relative to its peers and there is little doubt that CROX investors will get bitchslapped on this one sooner or later.
Still didn't interest me as a short (no fraud, and no unusual stock promotion activity save for Cramer and some hedge fund managers who like the shoes and are hell-bent on squeezing the shorts)....until...
I decided to do one more thing: check the online retailers to see if they were discounting the shoes, or if they had inventory problems. I noticed something very unusual - quite by accident. When checking the zappos.com site I noticed that just about the ONLY shoe that elicited consumer reviews was Crocs. In fact, there were HUNDREDS of reviews...all grammatically correct, with no misspellings and lots of exclamation points. And, ya know - call me a cynic - but if I didn't know better, I could almost swear that the reviews were written by a PR shill either trying to push shoes....or stock.
Uh oh.
Looks like this one merits a Wexler deep-colonoscopy. |
