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Keeping one step ahead of a shoe craze
TARA PERKINS
From Saturday's Globe and Mail
POSTED AT 12:00 AM Saturday, April 14
Many companies go to outrageous lengths and expense to have their wares endorsed by a celebrity. If a picture is worth a thousand words, one image of a Hollywood starlet eating or driving or wearing a product can be worth a thousand ads.
But those images are something that Ron Snyder, the 50-year-old chief executive officer of Crocs Inc., has tried to avoid. Shots of fashionistas donning the company's clog-like shoes just add to his headaches.
He's happy that the garish footwear has been a runaway success. But ever since Crocs pulled off the biggest initial public offering in shoe history early last year, Mr. Snyder has been keenly aware of critics who say the colourful shoes are a fad doomed to follow tie-dyed shirts and Cabbage Patch Kids down the path to near-extinction. The pressure has mounted over the past 12 months as the company's stock price has doubled a pace of growth that's hard to keep up. Investors are paying a multiple of about 33 times earnings to own a piece of Crocs.
Any company that has a product that's very popular and very hot with the consumers and retailers is always susceptible to be a one-hit wonder, Mr. Snyder said in an interview from Scottsdale, Ariz., where he has a second home.
Don't misunderstand he loves to see people wearing Crocs. He just likes it better when those people are, well, not trendsetters.
We think there's a better foundation in comfort and function than there is in style and fashion for the brand, he said. The shoes are made out of the company's closed-cell resin, called Croslite, which makes for soft, comfortable, lightweight shoes that grip slippery surfaces but don't stink on sweaty feet.
Crocs have their roots in Quebec City, where a Canadian research company, Foam Creations Inc., invented the formula for Croslite resin and developed a shoe out of the material. One of Mr. Snyder's friends from Boulder, Colo., started selling them as a boat shoe in the U.S. and it just took off from there, Mr. Snyder said. In 2004, Mr. Snyder and three friends from Boulder bought out the Canadian developers and Crocs was born.
In addition to its original boaters' market, Crocs have become a staple for nurses, teachers and gardeners and a sizable chunk of the mainstream market. I'm not kidding you now, we have probably 50 people who've written to us, and many of our employees, who've run marathons in them, Mr. Snyder said. I run in them. For what it's worth, the CEO has also sported them with a tux.
Whatever the use, there's no denying the shoes are hot. Crocs' profit jumped to $64.4-million (U.S.) last year, from $17-million the year before, as revenue more than tripled to $354.7-million.
In an effort to maintain that rapid pace, Mr. Snyder is putting in place a diversification strategy.
His first goal was to develop a global infrastructure, enabling the company to roll out new products quickly. Crocs are sold in more than 80 countries and the company has facilities ranging from a factory in Quebec City to a distribution centre in Shenzhen, China.
Its head office is in Niwot, Colo., but about one-third of revenue came from outside the United States last year, compared with 7.5 per cent in 2005.
Global growth is part of the reason the company will crank out more than four million pairs of Crocs this month, compared with about 10,000 pairs a month in late 2004, Mr. Snyder said.
One of the huge success stories has been Israel, he said. I think last year we sold 1.2 million pairs of shoes in Israel. There are six million people there.
The secret of Crocs' success, as Mr. Snyder tells it, is that our demographic is the largest of any shoe ever. There are Crocs for everyone from toddlers to grandmas. When we went into Israel, for example, we got every demographic, he said. I was over there, probably nine months ago, and there's literally a guy with a machine gun walking down the street, one of the military there, he's got Crocs on. And then I walk into a square, and there's an Orthodox Jew speaking on a podium and he's got Crocs on. I couldn't believe it.
With the global network in place, Mr. Snyder's second goal is to diversify. He has made a handful of recent acquisitions to that end.
In October, Crocs paid $1.5-million for Fury Inc., a five-year-old company founded by former National Hockey League player Keith Primeau. Crocs is now making hockey and lacrosse equipment featuring Croslite and rolling out a full lineup of NHL-branded Crocs for the 2007-08 hockey season.
Also in October, Crocs paid about $7.5-million for EXO Italia, a footwear designer in Padova, Italy. Design companies aren't expensive, Mr. Snyder said. They're typically small. What you want is a creative designer, and Padova is probably the shoe design capital of the world. The fruit of that partnership will be more traditionally shaped shoes made with Croslite.
In December, Crocs scooped up Jibbitz LLC for $13.5-million. Mr. Snyder and his team had been keeping an eye on the company, which makes colourful little charms that can be stuck on Crocs, and said wait a minute, we need to own that space, Mr. Snyder said. Jibbitz are described by one blogger as bling for your Crocs, but Mr. Snyder said they are another way to diversify because they can go on anything from clothes to backpacks.
The shopping spree continued this year, with Crocs buying sandal maker Ocean Minded LLC for $1.75-million in February. Ocean Minded's flip flops were relegated to California and Florida, and we said, Look, why don't we team up and we'll take your brand to the world,' Mr. Snyder said.
Market commentators have been weighing in on whether athletic apparel maker Under Armour Inc. or Crocs both of which had impressive IPOs has more staying power. It just so happens Crocs has poached a designer from Under Armour, Dawn Barbour, and we will be launching an apparel line later this year, Mr. Snyder said.
They will be your casual, comfortable, go-to clothing, just like your Crocs are, he said. He added that some of the pieces will have Croslite incorporated into the yarn. We'll launch larger lines for kids, men and women in spring of 2008.
While Mr. Snyder does all he can to expand into new markets, he believes there's room left for the basic shoe line to grow.
I still think there's 40 per cent of the people, or maybe 50 per cent of the people, who say Wait a minute, those are just too ugly, I'm not going to try them,' he said. But, when their friends say Wait a minute, just trust me and try them on,' we get another convert.
TARA PERKINS
From Saturday's Globe and Mail
POSTED AT 12:00 AM Saturday, April 14
Many companies go to outrageous lengths and expense to have their wares endorsed by a celebrity. If a picture is worth a thousand words, one image of a Hollywood starlet eating or driving or wearing a product can be worth a thousand ads.
But those images are something that Ron Snyder, the 50-year-old chief executive officer of Crocs Inc., has tried to avoid. Shots of fashionistas donning the company's clog-like shoes just add to his headaches.
He's happy that the garish footwear has been a runaway success. But ever since Crocs pulled off the biggest initial public offering in shoe history early last year, Mr. Snyder has been keenly aware of critics who say the colourful shoes are a fad doomed to follow tie-dyed shirts and Cabbage Patch Kids down the path to near-extinction. The pressure has mounted over the past 12 months as the company's stock price has doubled a pace of growth that's hard to keep up. Investors are paying a multiple of about 33 times earnings to own a piece of Crocs.
Any company that has a product that's very popular and very hot with the consumers and retailers is always susceptible to be a one-hit wonder, Mr. Snyder said in an interview from Scottsdale, Ariz., where he has a second home.
Don't misunderstand he loves to see people wearing Crocs. He just likes it better when those people are, well, not trendsetters.
We think there's a better foundation in comfort and function than there is in style and fashion for the brand, he said. The shoes are made out of the company's closed-cell resin, called Croslite, which makes for soft, comfortable, lightweight shoes that grip slippery surfaces but don't stink on sweaty feet.
Crocs have their roots in Quebec City, where a Canadian research company, Foam Creations Inc., invented the formula for Croslite resin and developed a shoe out of the material. One of Mr. Snyder's friends from Boulder, Colo., started selling them as a boat shoe in the U.S. and it just took off from there, Mr. Snyder said. In 2004, Mr. Snyder and three friends from Boulder bought out the Canadian developers and Crocs was born.
In addition to its original boaters' market, Crocs have become a staple for nurses, teachers and gardeners and a sizable chunk of the mainstream market. I'm not kidding you now, we have probably 50 people who've written to us, and many of our employees, who've run marathons in them, Mr. Snyder said. I run in them. For what it's worth, the CEO has also sported them with a tux.
Whatever the use, there's no denying the shoes are hot. Crocs' profit jumped to $64.4-million (U.S.) last year, from $17-million the year before, as revenue more than tripled to $354.7-million.
In an effort to maintain that rapid pace, Mr. Snyder is putting in place a diversification strategy.
His first goal was to develop a global infrastructure, enabling the company to roll out new products quickly. Crocs are sold in more than 80 countries and the company has facilities ranging from a factory in Quebec City to a distribution centre in Shenzhen, China.
Its head office is in Niwot, Colo., but about one-third of revenue came from outside the United States last year, compared with 7.5 per cent in 2005.
Global growth is part of the reason the company will crank out more than four million pairs of Crocs this month, compared with about 10,000 pairs a month in late 2004, Mr. Snyder said.
One of the huge success stories has been Israel, he said. I think last year we sold 1.2 million pairs of shoes in Israel. There are six million people there.
The secret of Crocs' success, as Mr. Snyder tells it, is that our demographic is the largest of any shoe ever. There are Crocs for everyone from toddlers to grandmas. When we went into Israel, for example, we got every demographic, he said. I was over there, probably nine months ago, and there's literally a guy with a machine gun walking down the street, one of the military there, he's got Crocs on. And then I walk into a square, and there's an Orthodox Jew speaking on a podium and he's got Crocs on. I couldn't believe it.
With the global network in place, Mr. Snyder's second goal is to diversify. He has made a handful of recent acquisitions to that end.
In October, Crocs paid $1.5-million for Fury Inc., a five-year-old company founded by former National Hockey League player Keith Primeau. Crocs is now making hockey and lacrosse equipment featuring Croslite and rolling out a full lineup of NHL-branded Crocs for the 2007-08 hockey season.
Also in October, Crocs paid about $7.5-million for EXO Italia, a footwear designer in Padova, Italy. Design companies aren't expensive, Mr. Snyder said. They're typically small. What you want is a creative designer, and Padova is probably the shoe design capital of the world. The fruit of that partnership will be more traditionally shaped shoes made with Croslite.
In December, Crocs scooped up Jibbitz LLC for $13.5-million. Mr. Snyder and his team had been keeping an eye on the company, which makes colourful little charms that can be stuck on Crocs, and said wait a minute, we need to own that space, Mr. Snyder said. Jibbitz are described by one blogger as bling for your Crocs, but Mr. Snyder said they are another way to diversify because they can go on anything from clothes to backpacks.
The shopping spree continued this year, with Crocs buying sandal maker Ocean Minded LLC for $1.75-million in February. Ocean Minded's flip flops were relegated to California and Florida, and we said, Look, why don't we team up and we'll take your brand to the world,' Mr. Snyder said.
Market commentators have been weighing in on whether athletic apparel maker Under Armour Inc. or Crocs both of which had impressive IPOs has more staying power. It just so happens Crocs has poached a designer from Under Armour, Dawn Barbour, and we will be launching an apparel line later this year, Mr. Snyder said.
They will be your casual, comfortable, go-to clothing, just like your Crocs are, he said. He added that some of the pieces will have Croslite incorporated into the yarn. We'll launch larger lines for kids, men and women in spring of 2008.
While Mr. Snyder does all he can to expand into new markets, he believes there's room left for the basic shoe line to grow.
I still think there's 40 per cent of the people, or maybe 50 per cent of the people, who say Wait a minute, those are just too ugly, I'm not going to try them,' he said. But, when their friends say Wait a minute, just trust me and try them on,' we get another convert.
