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Relax, Crocs Is Not Going Out of Business

Take a deep breath — the molded clog will live on.

Crocs Inc. this week spawned a social media melee when it announced — in conjunction with its second-quarter earnings results — that it was closing its last owned manufacturing facility, located in Italy.

Cue the hysterics.

Social media users took to Twitter to declare that the Croc apocalypse was upon us.

But experts and the company itself have brought clarity to the ruckus: Crocs has confirmed via a tweet — and in a email exchange with FN — that it is not going away.

“There have been multiple media reports that Crocs is winding down production in our owned manufacturing facilities,” a spokesperson for the brand said today. “While accurate, some people have interpreted that to mean that Crocs will no longer be making and selling shoes. Quite the contrary; Crocs will continue to innovate, design and produce the most comfortable shoes on the planet. As we streamline our business to meet growing demand for Crocs, we’re simply shifting production to third parties to increase our manufacturing capacity.”

The brand added, “We’re extremely grateful, but not surprised, that our passionate fans are rallying around the brand today. Our future is bright, bold and colorful.”

Market watchers, meanwhile, have pointed out an important distinction that some of the brand’s overzealous fans may have missed: The company said on Tuesday that it was closing its last owned factory.

“About 60 percent of Crocs’ products are produced by two factories in China and Vietnam [that it does not own],” explained Susquehanna Financial LLLP analyst Sam Poser, who cited a U.S. Securities & Exchange Commission filing.

In short, Crocs — which announced last year its plans to shutter more than 150 underperforming stores — is in the midst of a major turnaround effort that has seen it slash expenses by streamlining efficiencies and, now, ditching owned factories that likely cost more than they contribute. (A company spokesperson also noted today that the brand has completed the store closure plan and that its outlets, which are its most profitable store format, now represent more than half of its store fleet.)

“This is about as big of a non-event story as I’ve ever heard,” Poser said of the confusion spawned by Crocs’ factory closure. “Nobody owns factories anymore. This is actually a good thing for Crocs, that they’re getting out of the factories. They’re shifting a lot of their production to molded product [made in China and Vietnam]. The Italy factory [likely] focused on special product [editions] that they’re moving away from.”

On Tuesday, Crocs posted Q2 earnings that beat analysts’ predictions across the board, leaning on double-digit e-commerce growth and solid wholesale gains to make up for its shuttered stores.

Earnings per share came in at 35 cents, 4 cents above analysts’ estimates. Revenues beat targets, at $328 million, increasing 4 percent year over year, versus the $321.76 million that analysts predicted.

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