ShareThisBy JANET FORGRIEVE
Sunday, November 12, 2006
In a business park tucked between wide open spaces, a homegrown shoemaker has been playing musical buildings.
Crocs Inc. opened its office in the park in 2004 with a bit of space in one building. Today, it's got three facilities in the park, including the original space it moved from and reclaimed, and is seeking more.
The day after presiding over Crocs' latest earnings call, Chief Executive Ron Snyder looked out the window of his large corner office to the company's original modest office space.
"When we moved into that first building, the company had eight people. Now we're at 2,600, and we're continuing to add staff across the board," said Snyder, who was an early investor in and adviser to the company founded by three friends.
Snyder became Crocs' CEO in the summer of 2004. Less than two years later, on Feb. 8, 2006, Crocs raised $207.9 million in an initial public stock offering.
When he joined the company, factories were making about 10,000 pairs of Crocs Beach sandals each month. Today, international plants churn out 3.2 million pairs monthly, in 20 different styles, and a sophisticated inventory system helps Crocs quickly track what's selling and what's not.
The increased capacity seems to have quelled earlier complaints from some retailers that too often the shelves were bare and customers left empty-handed.
"We wanted to change production according to consumer demand," Snyder said.
Although the company is just four years old, its roots are already the stuff of legend.
Inventor Scott Seamans created the lightweight, resin boat shoes and introduced them to friends George Boedecker and Duke Hanson on a 2002 Caribbean boat trip. By the time the trio hit home port, a company had been born.
"It started with comfort and function, and now it's got the broadest demographic of any footwear," Snyder said.
Now, adding new models is part of the company's diversification strategy _ just in case Crocs' original shoes should prove to be a fad.
"We certainly considered the possibility that it would be a fad," Snyder said. "But we felt that, if it is a fad, we wouldn't know that for a number of years."
By then, he said, there would be enough new models to offset any drop in sales of the original Cayman and Beach shoes.
"The incredibly rapid growth of the Beach and Cayman models has been great, but there's a limit to how many they can sell," said Jeff Mintz, an analyst with Wedbush Morgan in Los Angeles. "They need to diversify into other areas, which I think they're doing."
Mintz, who has a "buy" recommendation on the company's stock, doesn't own any shares.
This year, Crocs launched several new models, including flip-flops and Mary Janes made of the same lightweight resin.
Crocs estimates that about 65 percent of its wearers are women and, while the number of male customers is growing, its newer, fashion-forward models are aimed at female buyers.
In its most recent earnings conference call, the company said that sales of Beach and Cayman models doubled to about $56 million in the third quarter, but sales of new models grew as well. Beach and Cayman styles were only about half of total sales, down from 70 percent in the second quarter.
In the United States, those originals _ brightly colored, hole-covered sandals _ were the first to grab consumers' attention at mall kiosks and sporting goods stores. Now, those early buyers are coming back for new styles, Snyder said.
That pattern _ attracting customers with the originals first _ is being repeated globally, he said, with the shoes now available in more than 70 countries, including recently added retailers in China, India and Brazil.
Crocs shoes are available in 15,500 retail locations internationally, including 9,000 in the United States. The company expects to open its first retail store next year, in New York's Soho neighborhood. Like its 70-some mall kiosks, the store will serve to reinforce the brand rather than compete with retail customers, said co-founder and Vice President Duke Hanson.
"Each kiosk has a list of retailers that stock our shoes," Hanson said. "The kiosks have increased sales for retailers around them."
Crocs on the march
_ Since its February stock offering, Crocs has inked deals to create new Disney-character shoes and to be the name sponsor for the AVP Beach Volleyball tour.
_ It has made two acquisitions, paying $10 million to buy Boulder-based Jibbitz, which makes charms that snap into the holes in Crocs shoes, and acquiring Exo Italia, a shoe design firm in Italy, for an undisclosed amount.
_ Crocs' product line has grown to 20 models, and nine more styles are due out in the spring.
_ The shoes have been featured on the feet of TV characters, including the doctors on Scrubs and Grey's Anatomy.
