Motley fool on Crox-
Crocs 2.0
Finally, add Crocs to your list of mid-cap stocks to buy right now, if you're looking to fill in certain holes in your portfolio.
This is the same Crocs that made the funky foam clogs that were all the rage in the early 2000s, until the fad fizzled by 2009. This footwear fell back into favor in 2019. Last year's top line improved to the tune of 13%, driving more than a 100% increase in operating income. Sales are projected to be flat for this year, but not due to a lack of demand. Many consumers just aren't comfortable going back to stores, and supply chains have been disrupted by shutdowns anyway. Even so, Crocs' expectation of 10% year over year sales growth for the quarter ending this month suggests it's overcoming coronavirus woes that others aren't.
Investors dismissing that quarterly growth outlook as a one-off rather than repeatable progress may be looking past a couple of important details.
One of those details? Much of this recent demand is built on function and comfort. Technology market research outfit IDC suggested earlier this month that by 2024, 60% of the United States' workers would be working outside of an office, including at home. This means that while appropriate attire may be needed for business-related video calls to the extent visible on camera, consumers love the ultra-comfortable footwear not seen by co-workers. Perhaps it took a decade for people to accept the foam clogs' unusual appearance.
The other reason Crocs isn't as prone to the sort of peak it saw in 2009? To the extent fashion and marketing does matter, the company is smarter. It's selectively collaborating with brands that help the company sell its wares -- there's a Vera Bradley Crocs shoe, for instance, yet it's also teamed up with Kentucky Fried Chicken -- rather than merely cranking out as many ordinary shoes as it can. While it's never provided specifics, the company has repeatedly credited these alliances for much of its sales growth since 2017 when they first began. This may have been the missing ingredient a little over a decade ago, and investors as well as analysts may still not be seeing the full potential of collaborations yet.
