BERLIN (Reuters) - The success of Crocs
Inc in Europe, where the U.S. shoemaker has focused on its trademark
colorful foam clogs rather than branching into other products, proves
the brand has a future despite difficulties at home, its European head
said.
Crocs, founded in Boulder, Colorado in 2002, quickly built a cult
following for its springy-soled clogs, selling more than 300 million
pairs of shoes. It now runs 624 stores and has expanded into
accessories and more fashionable shoe styles.
But profits went into decline as sales growth stalled at home and it
expanded rapidly overseas. Last month, the group said it would focus
back on its "core molded footwear heritage", cut 40 percent of its
350 product lines and close 75-100 stores as it trims investment in
small markets.
"You say 'Crocs' and a lot of people will frustratingly say 'are you
still around?'" Vince Gunn, Crocs European managing director, told
Reuters in a telephone interview.
"We are here, we're doing pretty well. If we can get the shoes on
you twice, then we've locked you in," he said. "The company is
growing up again ... You have to go through changes and get fit
again for the future."
While sales fell 5.1 percent in the Americas in the first half of
2014, they grew 9.4 percent in Europe to account for a fifth of the
total and rose 10.5 percent in Asia-Pacific, helping total group
revenues climb 2.6 percent.
"The European business was ahead of the game in managing the cost
base," Gunn said, noting that his unit already only offered about
170-190 products of the 350 in the global range, keeping a lid on
complexity. "We've tried to keep the range tight."
The European business has kept a closer focus on the traditional
clog rather than straying too far into other products, with clogs or
derivatives accounting for about 70 percent of sales, compared with
50 percent globally.
Crocs, in which a fund affiliated with investment firm Blackstone
invested $200 million in January, has seen its shares jump since it
announced restructuring plans on July 21 but they are still a
fraction of their 2007 peak.
Crocs is looking for a new chief executive officer after the
departure of John McCarvel in April. Andrew Rees, who helped develop
the company's new strategic plan while at management consultants LEK
Consulting, joined as president in May.
Europe will still be hit by the global store closure program, with
25-30 of the region's 230 stores set to go, Gunn said, but should
benefit from the firm's plan to increase marketing spending by about
50 percent.
Gunn rejected suggestions that part of the company's problem was the
durability of its clogs as one pair can last for years. All Crocs
shoes feature a trademarked material that is soft, light,
non-marking and odor-resistant.
"There are a lot of rip-off products out there. If we begin to
dilute the quality and the strength of the product, it is a very
dangerous path to go down," he said.
Crocs, which makes about a third of group sales from products for
children, has forecast that 2015 revenue would be hurt by store
closures before growth resumes in 2016 and beyond.
Crocs, founded in Boulder, Colorado in 2002, quickly built a cult
following for its springy-soled clogs, selling more than 300 million
pairs of shoes. It now runs 624 stores and has expanded into
accessories and more fashionable shoe styles.
