Blog: Leonie BarrieCrocs down at heel

Leonie Barrie | 25 July 2008

Can things get any worse for colourful clog maker Crocs? Once the darling of the stock market, its shares plunged by nearly half this-morning on news that its second quarter is likely to be dire and it’s full year results will also miss the mark.

There’s always been a fear that Crocs would turn out to be little more than a one-hit wonder. Incredibly popular as its footwear has been – and yes, in case you’re wondering, I do have a pair – there were always doubts about the longevity of the company once the popularity of its original shoe format started to wane.

About a year ago it seemed to acknowledge this problem, rolling out more upscale shoes and boots and a new clothing line – all featuring Croslite, its patented closed cell resin – as part of a mission to turn itself into a global lifestyle brand.

But yesterday it warned earnings for the year are likely to be “break-even”, while second quarter earnings per share are seen at $0.03-0.07 – a massive drop on earlier forecasts of $0.42-0.47. Crocs is blaming the weak US market for its woes, pointing out that international sales are rising. But not, it should be added, as fast as it expected and certainly not enough to offset lower US demand.

The problem seems to be that Crocs is little more than a fad. Its brand isn’t strong enough to command prices way above those of its imitators, it’s not a wardrobe essential, and once you have a pair you probably don’t need another. And now its management have lost so much credibility it’s going to be hard for the market to take them seriously again.

It doesn’t help either that the company is going to start putting warning labels on its shoes – the second piece of bad news for the firm this week. After a series of incidents where wearers have become stuck on escalators, Crocs has devised hang-tags with tips on avoiding accidents.

So as if it’s not bad enough that people are dithering over whether or not to buy its shoes at all, the warning label might just make that decision for them.

US: Crocs shares slashed after profit downgrade


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