After a corporate „quiet period“, US-brand Crocs, specialized in comfortable footwear made of the patented Croslite material, has reported a heavy income loss and announced some extensive structural changes.

In the first quarter of 2014, Crocs generated an operating income of $41.9 million, compared to $50.4 million in the second quarter of the previous year.
The reported net income was $19.5 million, compared to a $35.4 million net income in the same period last year.
In order to drive business improvement, the company has introduced several strategic initiatives.

Firstly, Crocs will eliminate 183 jobs worldwide; the majority of this undertaking has already been executed on Monday, July 21. As a result, the brand expects to save costs of $4 million in 2014 and §10 million in 2015.

Moreover, Crocs will rationalize under-performing business units. In this context, the brand will close or convert approx. 75-100 own retail locations worldwide with 18 stores already converted into partner stores in the second quarter of 2014. The impact of these closures is expected to reduce annual revenue by $35-50 million. The size of global company-operated e-commerce sites will be cut from 21 to 11.

The brand will also prioritize direct investment in larger-scale markets. In smaller markets, distribution responsibilities shall be transferred to local distributors and third-party agents as already implemented in Brazil, Taiwan and other markets.
Crocs will open a global commercial center in the Boston area in late 2014 to house key merchandising, marketing and retail functions and support the brand’s product creation center in Niwot, Colorado. Moreover, the regional commercial centers in the Netherlands, Singapore and Japan shall be strengthened with global responsibilities.

Furthermore, Crocs announced to streamline its product portfolio, reduce SKU and “eliminate non-core product development and […] explore strategic alternatives for non-core brands”, according to a corporate statement. Further, the company intends to increase working marketing budget by about 50%, primarily funded from a reduction of the marketing overhead.

“Crocs’ performance in the second quarter demonstrates […] the need for dynamic change in our strategy, organization and approach to the market,” said Andrew Rees, who was appointed Crocs new president in May this year.