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Massive Crocs store cull planned

One in four Crocs stores will be closed globally as the maker of the world’s ugliest shoes plots a survival plan.

The store cull was announced along with another quarterly loss: the shoemaker finished its last three months US$44.4 million in the red, albeit a better performance than the same period a year earlier when it lost $73.9 million.

Global sales were down 10.2 per cent to $187.4 million but in Asia the company says its retail sales declined by a whopping 16.6 per cent.

Total Asian revenue was $68.8 million, down 9.8 per cent year-on-year, with wholesale revenues down 5.3 per cent (explained as a result of the sale of the South African business in April 2016). Retail sales in Asia declined 16.6 percent, despite the opening of nine stores since 2015. Online sales declined 7 per cent in Asia, which Crocs says was the result of weak sales in China on Singles’ Day.

In Europe, revenue was down 14.2 per cent.

As it restructures to ensure its survival, Crocs CEO Gregg Ribatt will step down on June 1, to be replaced by Andrew Rees who has for the past two years been president. The two roles will now be combined and Ribatt will remain on the company’s board.

Rees told an analysts’ briefing that customers are responding favorably to new colors and prints added to the core Crocs molded product line.

“We’ve also confirmed the importance of any newness to our iconic molded footwear through new color and graphic introductions, and through the expanded use of licensed characters,” he said.

“Our spring/summer 2017 collection rolled out to warm-weather doors in November and early reads are encouraging. Going forward, our innovation and newness will be most heavily concentrated on core clogs and sandal, slips and slides where we see the greatest opportunity for growth.”

Crocs is also banking on the endorsement of the product by celebrities Drew Barrymore, John Cena, Yoona Lim and Henry Lau who will feature in the brand’s latest Come As You Are marketing campaign launching in April.

Full year figures

Crocs’ full-year picture was nowhere near as bad as the last quarter’s. Total sales were $1.04 billion, down only a little from the $1.09 billion of a year earlier. On a constant currency basis, revenues declined 4.7 per cent.  

The company recorded a full-year net loss of $16.5 million, far better than the $83.2 million of 2015. Excluding non-recurring charges, the adjusted loss was $26.9 million.

Rabat says Crocs has been reshaped into a company that :”functions more efficiently and effectively” and is in “a far better place now than two years ago”.

“And while the operational work is critical, it is not yet, and I emphasise yet, translating into the financial gains we continue to believe are achievable.”

Since 2014, Crocs has halved its SKU count, boosted the appeal of core sellers and added new collections.  

Once the store cull is complete in 2018, Crocs will operate about 400 outlets, adding $35 million to its bottom line in 2019. At the end of 2016 it had 558 stores.

Carrie Teffner, Crocs EVP and CFO, says that given volatile market conditions, the company is not setting mid-term revenue and margin targets.

“That said, we continue to believe that… longer term, the business can deliver EBIT margins in the 10 per cent range.”

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