Crocs cuts jobs but 'isn't in crisis'
The maker of colourful clogs everyone loves to hate, Crocs, says it is slashing more than 180 jobs, the closure of retail stores and the scrapping of brands in its product line.
The firm has announced restructuring plans which it said it would put the global shoemaker in a stronger position.
The "strategic performance improvement initiatives" coincided with the release of the company's second-quarter earnings.
During the most recent three-month period, Crocs reported a net income of US$19.5 million (NZ$22.4m), or 19 cents per share on revenue of US$376m as compared to income of US$35.36m, or 40 cents per share, on revenue of US$363m during the second quarter of last year.
"We have identified the key strategic and structural improvements that we expect will allow the company to achieve its potential," Andrew Rees, Crocs' president, said in a statement included in the announcement.
"We have a clear, well-defined strategy for addressing these issues and improving performance. Work is underway already to drive significant change throughout our company in four key areas."
The four areas outlined by Crocs are: streamlining the global product and marketing portfolio, reducing direct investment in smaller geographic markets, creating a more efficient organizational structure and closing or converting 75 to 100 Crocs-branded retail stores.
Crocs has 624 stores and about 5,000 employees worldwide.
As a result of the store closures, Crocs officials said, annual revenue will be reduced by US$35mto US$50m.
Revenue in 2014 and 2015 are expected to be affected by the store closures with growth resuming in 2016.
Rees said that while Crocs has been through various cycles in the past, the company is at a better starting point now.
"We're at a high water mark; we're not declining, we're growing (revenue), but we need to convert more of that revenue into profit," Rees said, adding that the cost structure got out of line.
"It's a key lever to be able to free up the resources to be able to do the things we need to do to be able to grow."
Those efforts include reining in a product line that strayed in breadth during the past two years, he said, adding that the focus will be on a core set of products including the clogs and casual shoes such as sandals and wedges.
Operational changes are expected to include prioritising direct investment in larger markets and "reducing structural complexity, size and cost" via job cuts.
The layoffs were expected to result in an annual cost savings of US$4m this year and US$10m next year, Crocs officials said.
The initiatives represented "the next stage of a Crocs transformation" that began with Blackstone Group's US$200 million investment at the end of 2013, officials said.
"This is not a crisis," Rees said. "This is an adjustment to our strategy so that we can be more successful."
- The Daily Camera