Crocs grows dramatically even amid supply chain challenges


Dive brief:

  • Crocs once again exceeded expectations, with a third quarter 73% revenue growth year-on-year to $ 626 million. Digital sales grew almost 69% and accounted for 36.8% of all revenue.
  • Direct revenues to consumers increased by 60.4% while wholesale revenues increased by over 88%. Operating profit more than doubled to $ 203.1 million, company statement says
  • This came even as the clog brand faced plant closures in Vietnam and “and widespread disruption of the global supply chain.” For the quarter, the company made capital expenditures of $ 75 million on its supply chain to support its growth.

Dive overview:

Crocs had to overcome several supply chain challenges to maintain growth throughout the quarter. At the peak of its earnings release, the company called out supply chain disruptions, including Vietnamese plant closures.

Retailers and brands that ship out of Asia have also had to deal with clogged ports, limited containers and space on ocean carriers, and many other headaches making shipping slower and longer. expensive.

In a conference call Thursday, Crocs CEO Andrew Reese said the Vietnamese factories the company relies on were closed for several weeks during the quarter. They started operating earlier this month, although they are in “various stages” of a restart.

Crocs has worked to minimize the impact on its business by moving production, including to China, Indonesia and Bosnia, improving plant throughput, shipping by air freight, and adding capacity to ‘shipping to the east coast to the United States so that the company is not as reliant on West Coast Ports, according to the company and Reese. Additionally, Crocs has strategically allocated merchandise to key sales channels, including e-commerce and its largest retail customers.

Reese noted that Crocs’ simple basic product setup makes it easy to switch production if necessary, giving the company an edge in a disrupted manufacturing environment.

On the demand side, Crocs posted stellar financial results this year as comfort and casualness took center stage during the pandemic. The company also has a versatile marketing operation that capitalizes on limited editions and partnerships of all kinds. Just in the 3rd trimester, Crocs featured collaborations with cosmetics brand Benefit, clothing brand Free & Easy, influencer Bretman Rock and the reboot of the movie Space Jam.

Despite bottlenecks in the global supply chain, Crocs expects 20% revenue growth this year. The company has set itself an ambitious goal of reaching $ 5 billion in revenue over the next five years, which implies an annual growth rate of 17% per year. Its long-term goal includes growing its digital channel so that it accounts for half of all sales.

Crocs, like other shoe brands Nike and Adidas, continues to grow sales through digital and DTC channels. The promise of the strategy is that brands can keep more margin to themselves through direct selling. A group of analysts from BMO Capital Markets questioned the strategy, believing that the switch to DTC sales can negatively impact sales and profits for brands.


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