Hot Crocs Faces Supply Chain Realities
In raising the company’s FY21 guidance last week after reporting a strong Q2, Crocs executives confirmed potential supply chain drags are embedded in the better outlook that includes full-year, global revenue growth of 60-65 percent and an annual adjusted operating margin of approximately 25 percent.
Transit times from Asia to most of the brand’s top markets have doubled over the last year, a factor that Crocs will continue to work with, and higher freight costs in H1 are forecast to escalate further in H2.
“We’re increasingly seeing COVID spikes in some of our primary manufacturing countries and are concerned about the short-term impact of potential factory closures on supply,” Crocs CEO Andrew Rees told analysts. “We have attempted to incorporate both the additional expense and the potential supply disruption into our guidance.”
Crocs does foresee “some temporary factory closures” in Vietnam in Q3 as the country battles the pandemic.
“But… we’ve embedded that into our guidance in terms of really trying to make sure that we’re confident in the amount of inventory that A, we have on hand, and B, what we have in transit. We really feel comfortable with where we are given those uncertainties,” Rees commented.
Further, Rees confirmed that Crocs currently has ability to move some sourcing capacity out of Vietnam, “but it’s not enough to make a wholesale change.”
Approximately 25 percent of all shoes imported into the U.S. and 51 percent of athletic shoes brought into the region are sourced in Vietnam, according to the Footwear Distributors and Retailers of America (FDRA).
In Q2, Crocs revenues rose 79 percent from their Q2/19 level to $641 million as Americas region sales jumped 136 percent and digital sales increased 99 percent from their 2019 level to represent 36 percent of all period revenues. Average Selling Price (ASP) during the period rose 8 percent to $21.84 on less promotional activity, higher pricing and a favorable product mix.
Meanwhile, the company is moving forward with initiatives to make itself “net zero emissions” by 2030 and more sustainable overall. Currently, 85 percent of Crocs are shipped without a shoe box, a percentage the company intends to take higher. The brand’s Classic Clog has a current carbon footprint of 3,94 kilograms, a fact that will be posted on the company’s website shortly.
Crocs & Socks
In other Crocs News: the brand is embracing the “debate” over whether wearing Crocs with socks is cool or not and launching a new line of Crocs Socks in partnership with California-based textile and technology company FutureStitch.
The new sock line has styles with prints featuring tie-dye, marble, camouflage and graphics. The socks are available in low, quarter and crew heights in 3-pack ($24.99) and 3-of-a-kind ($14.99) offerings. Each SKU — 23 in total — is inspired by footwear within Crocs' Classic Collection, including the Crocs Classic Clog, and Jibbitz charms.