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Crocs to Restructure, Cutting Jobs and Stores

Couple big fat red vol bars on the news. Bid bang.
Last: 14.84, Bid: 14.46, Ask: 14.90, Bid/Ask size: 700X100, High: 15.08, Low: 14.63
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7:16 p ET
Crocs Inc. has hit the other side of the tipping point.
After its clunky plastic clogs became a consumer sensation more than a decade ago, the Niwot, Colo. , company is feeling the bite of shoppers' changing fancies along with the sting of overexpansion.
The shoe maker plans to exit the leases on 75 to 100 stores and lay off about 180 of its 5,000 employees, including the elimination of about 70 jobs at its headquarters. It will also cut back on the number of styles it sells by between 30% and 40%, and drop some categories, including fashion leather boots and dress shoes made under the Elite brand, as it focuses on sandals, loafers and other casual shoes.
Crocs tried to diversify into new styles as its signature plastic clog lost favor with shoppers, but some of those styles were "too big a reach for the brand," said Andrew Rees , Crocs' president.
With their unusual hole-punch design and bright colors, Crocs' clogs became a hit after the company was founded in 2002. They surfaced on fashion runways and celebrities, including the chef Mario Batali , who has a Crocs style named for him.
After going public in February 2006 at $21 a share, Crocs' stock soared to $74.75 by October 2007 , giving the company a $6 billion market value. Investors cooled on it, though, as the novelty faded. On Monday, the shares closed at $14.84 , for a market value around $1.3 billion .
Mr. Rees says the company must get smaller to improve profitability. He plans to close or convert to third-party operators 75 to 100 stores world-wide out of its roughly 600 stores world-wide. The stores that convert to third parties will continue to operate as Crocs , but Crocs will no longer carry the expense of operating the locations, Mr. Rees said.
Earlier this month, Crocs reported that second-quarter profit fell 44% to $19.7 million . Revenue increased 3.6% to $376.9 million .
The moves are expected to result in savings of $4 million in 2014 and $10 million in 2015, even as the store closings reduce revenue by $35 million to $50 million , the company said.
In December, Crocs received $200 million from the Blackstone Group in the form of a preferred stock investment. The deal gave the private-equity firm a 13.5% stake and two board seats. Crocs is using the money along with existing cash to buy back $350 million in stock, of which $50 million has been repurchased so far this year.
Mr. Rees joined Crocs in June from LEK Consulting , where he led the consumer practice. While at LEK, Mr. Rees devised a plan to make Crocs more efficient, and it is that plan that he is implementing now. Crocs continues to look for a chief executive to replace John McCarvel , who retired in April.
The company will also open a new office in Boston that houses merchandising, marketing and retail functions. Mr. Rees said he expects it to be easier to attract executives to Boston than to the Colorado headquarters.
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(END) Dow Jones Newswires
07-21-14 1916ET
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