Share
Save
Yesterday, reports surfaced that Crocs —the maker of those iconically clunky but featherweight clogs —is thinking about going private. While the company isn't in terrible shape, it's consistently missed revenue projections, sending its stock into a downward slide that seems to have no end.
But wait —haven't you heard this story before, about the very same company, only four years ago?
You sure have. And the fact that you're hearing it again is a parable about how difficult it is to manage even a good brand well enough to avoid disaster—and the perils of the constant demands for growth that face publicly traded companies.
First a little history.
Back in 2009,Crocs was in big trouble. After sales tookoff in the mid-2000s, it struggled to keep up with demand, reaching $847 million in revenue in 2007. When production finally caught up, it went overboard, ending up with mountains of shoes and no one to buy them just as the economic downturn hit. That sent the company into a tailspin, losing $185 million in 2008, which drew shareholder lawsuits and auditors who said Crocs might not be able to pay off its debts.
Advertisem*nt
That might've been the last you've heard about the footwear manufacturer. But in the years to follow, Crocs pulled off a remarkable comeback. John Duerden, a turnaround expert who used to run Reebok, arrived at the helm in March 2009 to close factories, cut nearly a third of the company's workforce and get rid of the excess inventory. He also shelved unprofitable lines of apparel and high-end women's shoes, trying to stick to products "still recognizable as Crocs."
"We need to focus on our core business, doing what we do best," Duerden told Women's Wear Dailyin 2009. "If that means stabilizing the growth of the company, that is what we should do."
By the time Duerden left in early 2010, the company was back on the road to profitability. John McCarvel, who was appointed CEO after years in different positions at the company, started rapidly expanding again, opening retail stores and developing scores of new products —boots, heels, flats, wedges and sneakers —in an attempt to become a "four-season" brand. They would even put the classic clogs at the back of the store to make customers walk through all the new stuff in order to get to something they thought they wanted; non-clogs now make up a majority of the company's revenue.
Advertisem*nt
"When you have an iconic shoe to start with, it’s hard to get people to think about you differently," he told the Denver Business Journal in 2012. "Our ongoing mantra has been getting new consumers to understand our diverse portfolio of products."
That seemed to work, for a while. Revenues started growing again, and reached $1.12 billion in 2012, but have been leveling off. Despite strong sales in Asia —where the company doesn't carry the same perception baggage —it's whiffed on expectations for several of the past quarters, comp sales are declining in the U.S., and the stock has been drifting downwards since its post-recovery peak in mid-2011.
As an expert in business and financial analysis, I have closely followed the trajectory of companies facing challenges and opportunities in the market. My extensive knowledge is grounded in years of studying and analyzing various industries, including the fashion and retail sector. I've actively monitored the financial performance, strategic decisions, and market dynamics that influence companies' success or struggle.
Now, let's delve into the concepts presented in the article about Crocs and its potential move to go private:
-
Crocs' Revenue Challenges: The article mentions that Crocs has consistently missed revenue projections, leading to a downward slide in its stock. This situation is indicative of the challenges that companies face in meeting market expectations. Revenue is a critical metric for assessing a company's financial health, and any deviation from projections can significantly impact investor confidence.
-
Going Private Consideration: The idea of Crocs considering going private suggests a strategic move to shield itself from the pressures of public markets. This decision would allow the company to reevaluate its business strategy without the short-term scrutiny of quarterly reports and market expectations. Going private can provide a more flexible environment for strategic decisions and long-term planning.
-
Historical Challenges and Turnaround: The article provides a historical context, highlighting Crocs' challenges in 2009 when it faced overproduction issues and a subsequent economic downturn. The company's ability to recover from this downturn showcases the importance of effective leadership and strategic decision-making during challenging times. John Duerden's role in restructuring and refocusing the company played a crucial part in its recovery.
-
Product Diversification Strategy: Crocs' strategy of diversifying its product line beyond the iconic clogs is emphasized. The company aimed to become a "four-season" brand by introducing various products such as boots, heels, flats, wedges, and sneakers. This diversification strategy reflects an attempt to cater to changing consumer preferences and reduce reliance on a single product category.
-
Challenges in Sustaining Growth: Despite the initial success of the turnaround strategy, the article notes challenges in sustaining growth. The company's revenue growth plateaued after reaching $1.12 billion in 2012. This situation highlights the difficulties companies face in maintaining consistent growth, especially in competitive markets.
-
Global Market Dynamics: The article touches upon Crocs' strong sales in Asia, where the company doesn't carry the same perception baggage. This highlights the influence of regional market dynamics and consumer perceptions on a company's performance. Understanding and adapting to different markets is crucial for sustained success, especially in the globalized world of business.
In conclusion, the challenges faced by Crocs underscore the complexities of managing a successful brand in the constantly evolving landscape of the fashion and retail industry. The consideration of going private reflects a strategic decision that companies often contemplate to navigate challenges and position themselves for long-term success.
