I was wrong about John McCarvel. The way I judge a CEO’s operating ability is by looking at his or her prior track record. McCarvel had a run of a few very good years immediately after he became CEO in Feb 2010. In this situation, extrapolating from the past did not work. Currently, it seems like McCarvel was riding off of the momentum from the prior CEO (John Duerden) and is on track to slowly destroy Crocs. His decision to mislead investors with the share repurchase fakeout is bizarre and stupid. He is quickly destroying his credibility. And why exactly does he feel the need to mislead investors?
I must admit that I have a very small short position in Crox for shallow and superficial reasons. Mainly:
- There has been a dramatic drop in operating income, margins, etc. Same store sales have gone down slightly and definitely trail inflation.
- John McCarvel’s behaviour is bizarre. It’s more bizarre than Robin Raina’s behaviour at Ebix. (Unlike Crox, Ebix is likely a fraud. Like Crox, Ebix announced that it would repurchase shares even though future repurchases were unlikely.)
- The lack of repurchases, insider selling, and the bizarre behaviour suggest that McCarvel thinks that he is on a sinking ship.
This is not the greatest short position in the world. The company is still profitable and has many fans. 6 of the top #100 best-selling shoes on Amazon.com are Crocs clogs. I am betting on McCarvel running this company into the ground, which may not happen.
*Disclosure: Short CROX common at around $13.665. Still long some call options as I used to think that this company was a long (the options are far out of the money).