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Summary of Operations
Crocs, Inc. is a producer of casual footwear, mainly known for their product, the “croc,” a clog known for its flamboyantly bizarre appearance, high comfort for the foot, and low cost for the buyer.
Over the last five years, the company has both grown its revenues and operating margins, with a majority of sales (62%) occurring in the Americas. It sells its shoes to wholesalers, through its own retail stores, and through digital sales (the latter of which experienced significant growth after COVID). Its production is globalized, but most of it occurs in China and Vietnam.
Strategy
Crocs’s strategy is centralized on the strength of its brand and patents. The recognizable nature of the croc, supercharged with marketing and merchandising opportunities, make it unique in the world of shoe sales. Not very many brands, down to a specific type of shoe, are this well known. The croc is cartoonishly ugly, the kind that makes it fun to wear, as if to say to everyone, “I don’t care about what you like; I care about what I like.” This conceit is further bolstered by the comfort of the shoe and its practicality (waterproof and odor-proof).
The balance sheet is leveraged to finance growth. Debt-equity is high at 1.94, but the Current Ratio is a good 2.63. Its long-term debt is about $680 million, but this is close to the annual free cash flow right now.
Growth and the Future
Crocs is optimistic about its growth. It believes it can quadruple revenues by 2026 by focusing on its expanding digital sales, a strong marketing campaign, and deeper penetration of Asian markets. It believes the size of the casual footwear market is about $30 billion with no clear leaders and thus primed for a conquest.
Owners will benefit from its buyback campaigns. Since 2018, buybacks have reduced shares in circulation by about 16%.
Valuation
Growth Assumption: 15%
Intrinsic Value Per Share: $77
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