Crocs are cool ... Yes, really
A fashion for the colourful plastic clogs is a good reason to buy shares in the firm that sells them
You don’t need to like the look of Crocs to find the Colorado-based company that sells them an attractive investment.
Ever since they first came out more than a decade ago, the iconic plastic clogs have divided opinion. They are like “cargo shorts for the feet,” in the words of WSJ sports columnist Jason Gay. Whatever your view of their appearance, however, Crocs are in vogue: More people are searching for them and they are among the best-selling shoes on Amazon.
Ugly seems to be the new cool: Teenagers are among Crocs’ biggest fans. Social-media influencers and celebrities are wearing them. Clips on Chinese short-video app TikTok with people putting their feet into Crocs filled with shaving cream went viral. Limited-edition Crocs designed by rapper Post Malone and country musician Luke Combs both sold out instantly. The company has been trying hard to make its shoes appeal to a broad audience. It has partnered with streetwear brands like Alife and Chinatown Markets, but also high-end designers like Vivienne Tam and Christopher Kane.
After a near-death experience following the financial crisis due to overexpansion, the company has staged a comeback by downsizing, including outsourcing its manufacturing. It closed its last factory last year. E-commerce is the new growth spot: Revenue from online sales has grown at 15% a year on average since 2014.
Crocs increased its earnings forecast for 2019 earlier this month after beating estimates for last quarter. The company now expects a full-year adjusted operating margin above 10%, compared with 7.8% last year. It has also moved part of its supply chain out of China to prepare for the trade war. If everything goes to plan, next year less than 10% of its products sold in the U.S.—its largest market, contributing around 40% of revenue—will be sourced from China.
Even after a strong run last year, the shares aren’t expensive, fetching an undemanding 15 times forward earnings. As more people buy Crocs, more people should buy the stocks too. Ever since they first came out a decade ago, Crocs have divided opinion. But whatever your view, the plastic clogs are among the best-selling shoes on Amazon, with teens among its biggest fans.