Ugly Shoes As Economic Indicator: Crocs In Trouble

Here’s the problem with Crocs. You either love them or you can’t stand them. You make fun of them mercilessly, or you can’t imagine a more comfortable shoe. What’s problematic for the company that makes Crocs is that they don’t really wear out…and who needs multiple pair of glorified garden clogs in a recession?

Crocs came about in the brief economic boom earlier this decade and had a wonderfully successful run, but now the eponymous company that makes them is in trouble.

The company had expanded to meet demand, but financially pressed customers cut back. Last year the company lost $185.1 million, slashed roughly 2,000 jobs and scrambled to find money to pay down millions in debt. Now it’s stuck with a surplus of shoes, and its auditors have wondered if it can stay afloat. It has until the end of September to pay off its debt.

“The company’s toast,” said Damon Vickers, who manages an investment fund at Nine Points Capital Partners in Seattle. “They’re zombie-ish. They’re dead and they don’t know it.”

The story of Crocs mirrors the country’s tale of economic expansion and contraction. At the height of the real estate market, in 2006, the company sold shares to the public, raising more than $200 million in the biggest stock offering in shoe history. It ramped up manufacturing to keep up with demand, only to then find that shoppers were snapping their wallets shut.

That’s the problem with making a durable, sturdy product, kids. Remember that if you want to launch your own shoe company. Self-destructing is the way to go!

Once-Trendy Crocs Could Be on Their Last Legs [Washington Post] (Thanks, Peg!)

(Photo: ashi)

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