Hoover’s began covering Crocs when the company filed in 2005 to go public. And, to be honest, I have wondered what the future held for the foam slip-on clogs with a snappy name. Was its fate destined to be that of other fast footwear fads: Jellies or Dr. Scholl’s wooden Exercise Sandals? Any skepticism that took root while I have tracked the footwear maker’s business during the past seven years — and through the harsh recession — was silenced recently as Crocs reported more than $1 billion in annual sales.
This is a notable revenue milestone in the consumer products industry in general. Companies that take a much bigger bite than Crocs, such as Procter & Gamble, are quite boastful about their billion-dollar brands. These moneymaking names — for P&G it’s the likes of Tide, Gillette, Mach3, Duracell — represent pillars on which companies build their business.
So how did a company that once focused on making molded footwear for children reach its historical revenue heights? Along with so many other consumers, I have witnessed the footwear’s popularity swell, even seeing 60-something men scuffing around HEB’s frozen food section in big blue Crocs. To its benefit, the company quickly grew up. Crocs now chases after adults, rather than children, for their deeper pockets and serves new industries, such as health care. The footwear manufacturer and retailer also greatly fine-tuned its business during the economic downturn to ride out the recession.
Despite a difficult selling environment industrywide, the footwear maker boosted 2011 sales more than 26%, compared to the same period in 2010. The company attributes the spike to a 13% increase in average selling price for its shoes and a 12% rise in global footwear unit sales. As Crocs works to transform its brand from what the company calls a “clog silhouette” to an all-season footwear brand, Crocs upped wholesale sales 24% in 2011 vs. 2010, primarily driven by strong demand in all three operating segments, particularly Asia. Retail revenue rose nearly 32%, as well, by opening new stores. Additionally, Internet sales increased 28% thanks to demand in the Americas and Europe.
Crocs has built a relevant global business since it began peddling its clog-style footwear in the US in 2002. Today, the company sells its products in more than 90 countries, operates manufacturing facilities in Mexico, Italy, and China, and boasts distribution centers worldwide. Besides selling through big retailers, Crocs operates about 180 of its own stores and kiosks globally. Its strategy has been to expand on both domestic and international fronts and through acquisitions.
The Colorado-based manufacturer has heated up its licensing efforts, as well. Crocs partners with such companies as Disney, Marvel, and Viacom, to sell Crocs-licensed shoes and Jibbitz-branded shoe charms. In keeping with its strategy to extend the reach of its brand, Crocs in 2011 began to license certain trademarks to third parties.
The company’s road to $1 billion in sales has been a rocky one. Changing fashion tastes and the recession have taken a toll on Crocs. The shoe maker’s aggressive expansion followed by the untimely economic downturn in 2008 saddled Crocs with growing debt. The recession also put the brakes on the revenue momentum the company had spent several years to build.
To survive and eventually thrive, Crocs in 2008 implemented an unpleasant turnaround that continued through 2010. As part of its strategy, the shoe maker consolidated its global manufacturing facilities and distribution centers, reduced warehouse and office space, cut its global workforce by a staggering 33%, sold off discontinued inventories, and reduced other discretionary spending. During the process, Crocs began to see improved year-over-year gross margins as early as 2009.
Crocs continues to look for ways to cut costs and pay off its debt. Currently the manufacturer is tapping a newly amended $70 million revolving credit facility inked in December 2011 with PNC. The funds can be used for working capital, capital expenditures, acquisitions, and stock repurchases; it’s set to mature by the end of 2016.
Looks like Crocs is here to stay — as a form of footwear fashion and as a growing global manufacturer and retailer — despite a vocal group of dissenters, including Bill Maher and CafeMom’s The Stir. If you’re just as intrigued that Crocs has emerged from the recession posting its biggest revenue in company history, were you aware that Texas-based shoe maker Heelys is still rockin’ and rollin’? Fad or funky enough to stay?