Crocs Back on Track?

NEW YORK — With a new marketing campaign, two flagship stores opening next month and a fresh assortment of product, Crocs Inc. President and CEO John McCarvel is optimistic about 2010.

“We have a great line of product and we have a really good vision for where the brand is going,” said McCarvel, who has been with the company since 2004 and in March replaced John Duerden, who left less than a year into the job. “With great product, coupled with an edgy, fun and a little bit different ad campaign, you get a reaction. What we’ve seen so far has been very positive. We’ve been happy with [the response].”

In February, Niwot, Colo.-based Crocs reported a narrower fourth-quarter loss on an increase in sales. The firm, which has had a tumultuous ride since its 2006 IPO, said it had a loss of $11.5 million, or 13 cents a share, including certain charges, versus a loss of $34.7 million, or 42 cents, the prior year. Revenues rose to $136 million from $126.1 million a year earlier.

Jeffrey Klinefelter, senior research analyst at Piper Jaffray & Co., believes the worst might be over for the brand.

“We expect Crocs to deliver top-line growth and meaningful profit improvement in 2010 after stabilizing their balance sheet and their distribution channels in 2009,” he said. “2010 should be more about returning to growth versus stabilizing the business.”

One key factor behind the company’s improvement is its spring marketing campaign (released earlier this month), according to McCarvel. The new campaign features “Croslite,” a character based on the brand’s traditional clog model, and the slogan “Feel the Love,” which appears across all channels, including TV, print and online.

Brian Maloney, CEO of PR firm Maloney & Fox, was impressed by the Croslite character in the ads, which he first saw on a bus in New York. “It’s a really good start to reinvent their brand because you’re putting immense personality into a [company] that got stale,” said Maloney. “You’re going to need people to come back to the Crocs story, and they have tremendous opportunity with these characters.”

The ads also aim to display new spring styles, such as flip-flops and flats for women, loafers for men and slip-ons for kids.

“If we make it a little bit more stylish, then we start to appeal to a larger audience,” said McCarvel. “There was a push with this ad campaign to show consumers and people who don’t know that much about the brand that we have a wide portfolio of products.”

The company also is exploring additional product opportunities, with plans to expand into the back-to-school channel and build a stronger presence during the holidays. “Fall and winter have traditionally not been an area where we’ve resonated with consumers as a brand. That’s really been our focus from a branding, marketing and product standpoint,” said McCarvel.

Klinefelter noted that the product line is moving in the right direction. “They’re in a better place because they demonstrated during 2009 some product development, new style testing and a really successful performance in their direct channels,” he said. “They were known for one unique style that was copied and knocked off and became saturated in terms of distribution, so expanding beyond original styles was crucial to the future success of the company.”

In mid-May, Crocs will roll out two additional flagship locations, in Boulder, Colo., and on Spring Street in Manhattan.

Throughout this year, it plans to open between 30 and 50 stores globally, including units in Asia and Europe. Outside of the flagship stores, the firm intends to invest in outlet malls, mid-malls and retail kiosks to continue to build the brand.

“Wholesale is a key channel for us to continue to work with and develop. We caused a lot of problems with overdistribution two to three years ago,” said McCarvel. “We’ve spent a lot of time refocusing the brand with retail partners and we’re going to make those decisions as each year comes about and [observe] what the dynamic is in the retail environment.”

Richard Polk, president of Boulder-based Pedestrian Shops, said that when the brand was at its peak, his stores were selling 100 pairs of Crocs before lunchtime. While brand sales have slowed lately, the retailer continues to see success with the line.

“It hasn’t been the dollar leader at our store, but it hasn’t stopped being the unit leader,” said Polk.

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