While rationalizing its store base in the Americas in its transition year, Crocs Inc. is still eyeing strong growth potential at wholesale in the region.
Last week at the Piper Jaffray Consumer Conference, Gregg Ribatt, CEO, said that while Crocs already has a “meaningful wholesale business” in the U.S., the core channel growth and focus in the near-term is the family channel and the company doesn't have a broad range of SKUs at each key family retailer. First, Crocs first has an opportunity to “drive increased velocity” by having better core product and supporting that product more effectively. A second opportunity for U.S. wholesale, however, is expanding SKUs.
“Those two initiatives will be our focus in terms of driving dollars per door growth,” said Ribatt. “We're not really focused on door expansion. Our sole focus is around driving that dollars per door growth.”
In 2014, wholesale sales in the Americas region declined 4.4 percent to $228.6 million and were down 3.0 percent on a currency-neutral basis.
Likewise, Crocs is “paring back” its doors in Europe to focus on wholesale growth with a similar focus as the Americas. Asia already is showing a strong growth platform in e-commerce but wholesale growth will be the focus as well in China, Japan and Korea
Indeed, Ribatt said that while many of its transformation steps put in place over the last twelve months has focused on shoring up profitability, the reason he became CEO tied to Blackstone’s investment in Crocs in December 2013 is because of the brand’s growth potential. Said Ribatt, “When you look at our business on a region by region basis, we have significant growth potential in all the markets we compete.”
By region, Asia likely has the “biggest long-term growth potential,” followed by the Americas and then Europe.
Ribatt elaborated on the progress Crocs made since announcing its turnaround plan last July. “Substantial progress” has been made in creating a global brand positioning for Crocs. The former regionally-oriented structure empowered local employees but added costs and created inefficiencies. While still letting regions provide input, “clear ownership and accountability” of the product line is now run by its global product team, which is led by Michelle Poole, who formerly led design for Sperry Top-Sider.
The shift has helped lead to a 48 percent reduction in SKU count for spring 2016 and led to more global alignment around the line. In the past, 30 percent of the spring line would be part of the global line but that has climbed to 60 percent for 2016.
Ribatt added that distributors have been “extremely positive” about the spring 2016 line, which is Poole’s first with Crocs, and input has likewise been favorable form retailers. Said Ribatt, “It's the most commercial line that the company's seen in a number of years as shared by the retailer and distributor community back to us.”
Another positive has been the response to Croc’s first global campaign launched in early May, backed by an greater marketing spend. Ribatt noted that in the past many different agencies were developing distinct campaigns in different parts of the world. Feedback on the new campaign has been “extremely positive” when measured by retail traffic, online traffic, retailer feedback and social media, he added.
Besides wholesale, another growth area is e-commerce, which has been lagging over the last several quarters. The new management team has made Crocs’ e-commerce site “more brand centric” versus more of a catalog feel previously. Ribatt added, “We've kind of elevated capabilities. We're showing our product differently. And then frankly, having a new more focused marketing campaign is also making a big impact. So we see that as continuing to be a critical platform for growth in the future.”
Meanwhile, Crocs retail store base has shrunk to 588 currently from peak levels over 600 with another 35 stores expected to shutter over the next few quarters. Crocs will still explore opening stores in economically-viable locations but has no plans to revive its past aggressive expansion efforts at retail. Jeff Lasher, CFO, said at the conference, “It's going to be ones and twos kind of locations around the globe to fill in the map and make sense out of the economic model that we have.”
