Crocs closes down last production sites in Mexico, Italy
today Aug 22, 2018
Renowned plastic clogs brand Crocs is closing down its two remaining production sites, in Mexico and Italy, in an effort to improve profitability and with the goal of concentrating on e-tail development. Crocs, which is based in Niwot, Colorado, and operates 400 stores worldwide, will outsource manufacturing and focus on growing its online business.
“In connection with our ongoing efforts to streamline the business and improve profitability, in the second quarter the company closed down its Mexico production site and has decided to also close the last remaining manufacturing facility, located in Italy,” wrote the brand in a press release, published with the latest quarterly results.
Crocs was nevertheless keen to reassure the fans, Michelle Obama among them, who worry about its future: “FALSE ALARM: we aren’t going anywhere” tweeted the group.
Crocs recently appointed as CFO Anne Mehlman, a former director at online footwear retailer Zappos.com, owned by Amazon. She will start in her new role on August 24.
In the course of the second quarter, Crocs closed down 28 physical stores. The move is consistent with the strategy announced earlier in the year, which involves the closure of more than one hundred stores. Because of the closures, Crocs lost $22 million in revenue in the second quarter.
Profits nearly double
Crocs provided no details about the future of the employees affected by the reorganisation, and simply stated that it has already recorded the costs in its second quarter accounts, and will do the same in the coming months.
The costs in questions include severance pay and amounted to $7.1 million.
In general, Crocs is in sound financial health, and posted a net income of $30.4 million, nearly double the amount recorded in the second quarter 2017 ($18.1 million). Revenue increased by 4.7% on a yearly basis, reaching $328 million. Excluding exchange rate effects, growth was 2.3%.
Specifically, Crocs’s e-tail revenue grew by 23.8%, while wholesale revenue rose by 7.2% and comparable retail sales by 7.1%.
As a further indication that the situation isn’t serious, Crocs bought approximately $6 million’s worth of its own shares in the second quarter, and is planning to buy for another $307 million in the future.
Buying shares is an indirect way of pampering your own shareholders, as it pushes the share price up.
Crocs was created in 2002 and went through a troubled patch after a few years. It was eventually bailed out in 2013 by US investment fund Blackstone, enabling the company to further diversify. Crocs’s plastic clogs have notably become the footwear of choice in many hospitals.
In 2017, Crocs teamed up with Balenciaga, launching a hugely successful platform version called ‘Foam’.
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