Crocs Sets Out to Hit $1B Mark

NEW YORK — Could Crocs Inc. become a billion-dollar company?

Company President and CEO John McCarvel thinks so.

To get there, the Niwot, Colo.-based firm, which has made strides to return to profitability, is stepping up its product range to woo an “extended population of consumers,” McCarvel said last week during a presentation to analysts at the brand’s Spring Street flagship.

With that in mind, Crocs has diversified into toning — producing 12 to 16 styles of sandals, flip-flops and flats called CrocsTone, launching next month — and added sneakers and rainboots that all retail for less than $75.

As it rolls out new looks, Crocs said it expects its core clog style to account for less of the revenue pie.

“The product piece [of our turnaround story] is what we’re most proud of,” McCarvel told Footwear News after the analysts’ briefing. “Two years ago, we were hardly doing any business, [but] we’ve worked hard to get retailers excited about the brand again. That reinvigorates the wholesale channel, which gives us tens of thousands of doors globally.” McCarvel added that Crocs “can’t afford to build as many stores [and] manage growth at as rapid a rate as [retailers] can.”

That is a lesson Crocs learned all too well when it went public four years ago and expanded too quickly. Soon after its 2006 IPO, consumer demand plummeted, and the company’s inventory level rose 28 percent during the fourth quarter of 2007.

Crocs lost $42 million in fiscal 2009, but returned to profitability in the first and second quarters of 2010, thanks to a combination of cost cuts, staff reductions, factory closures and selling product at higher margins. It also slashed inventory.

For the second quarter ended June 30, 2010, net income was $32.3 million, or 37 cents a share, a reversal from a loss of $30.3 million, or 36 cents, in the same period a year ago. For the quarter, it registered $228 million in sales.

“Key growth drivers [for Crocs] into fiscal-year 2011 include … likely comp-store improvement from new styles and improved inventory positions, [as well as] incremental distribution with family footwear retailers [in the U.S.] and continued strong growth in Brazil and China,” Stifel Nicolaus analyst Jim Duffy wrote in a research note.

Despite its improved capital structure and liquidity, Crocs is not seeking to make acquisitions anytime soon.

“Right now, it’s about continuing to build the brand in the lifestyle space,” said McCarvel. “We can be a billion-dollar-plus brand. We just have to execute.”

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