What's good for Crocs is good for America?
Filed under: Company News
It used to be that what was good for General Motors was good for America. That was about 50 years ago, and now GM is bankrupt. Fortunately, America does not stand still. In 2002, a new American business icon was born -- Crocs (CROX). But now Crocs, maker of flashy plastic clogs, is getting flushed.
During its heyday, Crocs was the ultimate American product. President George W. Bush, whose last "gift" to America was the current economic catastrophe, sported a pair of its brightly colored, Swiss-cheese-holed clogs, along with his pal, Aerosmith frontman Steven Tyler. But Crocs is now poised to go out of business unless George Clooney can help revive it.
In the last seven years, 100 million pairs of Crocs have flown off store shelves. And as an American business icon, they're fitting. After all, the material from which Crocs are fashioned was invented in a Canadian laboratory in 1999 and a couple of Boulder, CO businessmen molded the lightweight, antimicrobial foam -- dubbed Croslite -- into a boating and water-sports shoe.
In 2006, Crocs went public -- raising $200 million which it used to expand production to meet growing demand. But the shoes were so indestructible that people could only buy so many of them before they had their fill. When the far flimsier flip-flop became popular and the economy began its long downward tumble in 2007, Crocs found it had borrowed too much money to build the plants it thought it would need to meet growing demand, just as that demand got crushed in the downward escalator.
Last year Crocs lost $185 million and now its auditors doubt it can survive as a going concern since it's having trouble repaying its debts. As Crocs' auditor wrote in its 10K, "the maturity of the Company's Revolving Credit Facility on April 2, 2009 and losses from operations raise substantial doubt about its ability to continue as a going concern."
And for shareholders, Crocs has mirrored the economic bubble of the Bush era. Its stock rose 431 percent from its $13 IPO price until it peaked in October 2007 at $69 a share -- which coincided with the Dow's all-time high. Since then Crocs stock has lost 95 percent of its value as its market capitalization has plummeted by $5.5 billion to its current $266 million.
This February Crocs replaced the CEO who presided over the growth and collapse -- Ron Snyder -- with a brand turnaround expert -- John Duerden -- who thinks he can sell more Crocs to caterers, medical workers and people with foot problems. Duerden hopes former ER doctor, George Clooney, will wear a red pair.
Crocs, like most of the U.S. economy, is in the emergency room. And it will take more than George Clooney to revive it.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in Crocs securities.
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Reader Comments (Page 1 of 1)
7-16-2009 @ 12:36PM
Iridium said...
Peter,
Please don't continue to pass along the BS story of the creation of Crocs. The material was not invented in a Canadian lab, nor was it a new product. It is like saying Under Armour invented moisture management fabric.
Crocs are nothing more than Asian shower sandals that have been made from injection molded foam for over 20 years. They are in fact antimicrobial and look exactly like Crocs. They may have made a similar material in Canada but it is far from unique.
The two guys from Boulder added an ankle strap and the rest is history. They were not inventors or innovators. They weren't even good businessmen. There wasn't a buyer in the country that would take the shoes. People who did buy the shoes created the brand through word of mouth. Eventually the big box stores had to bring them in. Crocs success has more to do with a few housewives who campaigned aggressively on the internet to promote them than anything the actual company did. Even if Crocs stayed at the top of the game they would do nothing to help America. Not a single pair of Crocs are produced in this country. About the only thing Crocs can do is increase the number of minimum wage mall workers.
The worst offense is that the two guys from Boulder actually conned people into paying $30 for a pair of shoes that cost pennies to produce. That is why Crocs is going out of business. Did they think that the hundreds of Chinese factories that essentially make the same exact product would stand still and let this American company make outlandish profit and not try to get in on the action?
Every single manufacturing trade show was inundated with Croc type shoes. Any company could buy a pair of Crocs for less than $.75 a pair landed. You could wholesale them for $5 a pair for a retail price of $10-12 and make $4.25 proft on every pair sold.
SO why would you stock Crocs? Pretty soon people became aware of the Crocs con and figured out you could buy the same type of shoe for $5 and they felt the same. Instead of lowering the price to compete, which would have reduced profit causing a massive share collapse, Crocs actually increased their price when sales started to slip.
The story of Crocs is nothing more than the story of every single American company. A story of total corrupting greed, overproduction, and overeliance on a name to increase sales in the face of ever increasing competition. The day Crocs went public was the day they declared bankruptcy.
Crocs made every wrong move to become a true brand and lasting corporation. They did make a few good moves to enrich a few select people. I guess in the end that seems to be the most American thing to do.
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7-16-2009 @ 2:02PM
Sissy said...
What was the point of including this tidbit in your article: "whose last "gift" to America was the current economic catastrophe"? Bush did not single-handedly destroy our economy. It was a multitude of factors. I just think it's odd that you felt like you needed to get a pointless political jab in while writing an article about shoes. It would have been an equally boring read without your snarky comment added in. You seem like a very bitter man Peter.
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7-17-2009 @ 3:56AM
John said...
http://www.crocs.com/
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7-18-2009 @ 10:15AM
Charlie said...
They may be hideous, but they are comfortable. And the knock-off brands aren't nearly as comfortable. My first pair was a knock-off bought primarily to wear out in the yard for picking up after my monster-dogs. But then I tried on a pair of the name brand Crocs & thought I'd ascended to heaven. Wow! What a difference. They are really comfortable. And for people with wide feet they are the 'next-best-thing-to-sliced-bread'. I have wide feet, and my feet also get very hot (& sweaty, yuck). But that's not a problem when I wear my Crocs. I just bought the golf Crocs, because I hate my feet being bound up in shoes & couldn't find comfortable golf sandals. So I may look silly and ugly, but I am comfortable, and that's all that matters. Frankly, I don't care what others think of me. People who pass judgment on others w/o knowing the other's situation are not worth my time or energy. :')
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