In 2018 alone, Nike footwear generated $22.27 billion in revenues. However, hitting the $1 billion mark without tapping the athletic shoe market is an impressive accomplishment.
Crox, maker of Crocs shoes, has surpassed this threshold, making it one of the ten largest non-athletic shoe brands in the world.
How did Crox edge its way into the highly-competitive shoe market? And will it continue to grow in coming years? These are the big questions for investors who are considering purchase of Crox stock.
The Medical Benefits of Crox
By any measure, Crocs Inc. has exceeded expectations since the company launched its proprietary shoe design.
Founders Lyndon “Duke” Hanson, and George Boedecker, Jr. saw promise in an innovative foam technology developed by Foam Creations.
The product, named Croslite, is a closed-cell resin often described as injection-molded EVA foam. The primary selling point when it comes to using this foam in footwear is that over time, it conforms to the shape of users’ feet.
Some podiatrists have stated that there are medical benefits to wearing shoes with this feature.
Hanson and Boedecker bought the design for Foam Creations’ clogs and launched Crocs. The first Crocs foam clogs were introduced in 2002. That batch of 200 sold out immediately, and the brand took off.
By 2004, Crocs was ready to buy Foam Creations outright, ensuring exclusive rights to the foam technology going forward.
The US Ergonomics company tested some Crocs models right away, and it began recommending the design as early as 2005.
In 2008, The US Centers for Medicare and Medicaid Services approved certain Croc designs that featured molded insoles for diabetics, as an option to reduce potentially deadly foot injuries. Shortly after that, the American Podiatric Medical Association accepted some types of Crocs in the care and treatment of foot-related conditions.
How Crocs Blew Up
Crocs [NASDAQ: CROX] had registered its name and logo in more than 40 jurisdictions by 2007, and the company expanded its brand to include additional products like goggles, sunglasses, knee pads, luggage, and watches.
Soon, Crocs [NASDAQ: CROX] were the It fashion accessory, and the company began offering a wide variety of colors and styles to fit any occasion.
Consumers loved the comfortable design, and they responded to the shoes’ lightweight feel. Better still, Crocs are non-marking and odor-resistant, solving many of the issues that plague other shoes designed from man-made materials.
More than 600 million pairs of Crocs [NASDAQ: CROX] have been sold worldwide since that first design was launched in 2002.
Today, the shoes are available in more than 90 countries, thanks to the effort of 4,000-plus global employees. While this level of success is not particularly notable for athletic footwear companies, it is remarkable for a brand with no sports or fitness tie-in.
Crox Stock Forecast: By The Numbers
In its second quarter 2019 earnings call, Crocs [NASDAQ: CROX] had a lot of good news to report.
Quarterly revenues grew 9.4 percent year over year to a total of $358.9 million. Much of that growth was attributed to the e-commerce channel, which improved by 18 percent.
Selling, general, and administrative expenses (SG&A) went down, coming in at a total of $141.5 million, as compared to second quarter 2018’s $144.3 million.
Most importantly, net income from operations increased by 29 percent year over year, moving from $37.1 million to $47.8 million. Diluted earnings per share improved by 57 percent, from $0.35 per share in the second quarter of 2018 to $0.55 per share in the second quarter of 2019.
During the earnings call, business leaders indicated that their third quarter guidance looks quite promising. The company is expecting quarterly revenue between $295 million and $305 million, which is a substantial increase from third quarter 2018’s $261.1 million.
Overall, business leaders indicated that final 2019 results will be better than they initially expected. Originally, the company predicted revenues would improve by five to seven percent over 2018. The new guidance calls for revenue growth of between nine percent and 11 percent. But does all of that mean Crox is a buy?
Is Crox a Buy?
Crocs [NASDAQ: CROX] held its IPO on Feb 8, 2006, with shares priced at $21. By October 2007, the stock price was over $68 per share.
It plunged to just over $1 per share by November 2008, before making a gradual recovery. While Crox has never regained those all-time highs, investors have seen solid increases.
The company’s successful turnaround in 2018 put Crox back in the spotlight. Over the year, business leaders raised their guidance three times, and by the time 2019 rolled around, stock prices gained 105.5 percent.
It hasn’t been smooth sailing since, but 2019’s second quarter financial results and third quarter predicted results indicate the company has potential for strong revenues and profits going forward.
While there is always a risk that these gains won’t materialize, Crox appears likely to deliver. That makes Crox stock a solid choice for new investors who want to enter the retail clothing and accessories market.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.