How To Add $1B Of Revenue In One Year
Corporate leaders often rush into the future, executing the latest growth plans and getting through the next quarter without the latest insights to help. As global leaders, we need to take pauses for study and reflection to learn from the past, our competitors, events and crises – especially the great crisis the planet has just gone through. Let’s call it pandemic reboots from an unexpected and underappreciated brand – Crocsinc (NASDAQ:CROX).
Some of the most remarkable reboot stories start with a strong team and a passionate leader. Often with a new perspective on things. At Crocs we talk about Elaine Bolz. Her first day of work as the new Chief Operating and Transformation Officer was March 202 – COVID’s equivalent of D-Day. No sooner had she settled into her new abode in her cool Colorado headquarters than the pandemic crippled supply chains and manufacturing—but also helped make Crocs a true zeitgeist performer.
Let’s jump to the end of the story. These shoes, which people tend to hate – but everyone from preschoolers to garden grandmothers have a pair – have once again become a huge hit. In 2021, the company posted sales growth of 67% and an industry-leading operating margin of 30%, and sold 103 million pairs of shoes worldwide, up 49% from 2020. In the fourth quarter, the brand sold 22.6 million pairs, an increase of 19.7% YoY last year – with sales of $1 billion in just one year!
With earnings up 51% in the second quarter of 2022, Crocs has continued that momentum, growing revenue by 20% in the first half despite a challenging global operating environment. The brand posted revenue of $732 million in the second quarter, up 19% from the same period last year. Crocs appears to be doubling down on consumer desires for convenience and value as it embarks on a mission to hit a whopping $5 billion in revenue by 2026. Crocs CEO Andrew Rees says: “I think we are on the right track. We gain market share. And even in that environment, if there is a recession or the consumer continues to tighten, we are bullish on our chances because our price point is $50…”
Crocs acquired HEYDUDE for $2.5 billion this year, diversifying its portfolio and adding a second high-growth, highly profitable brand. The company acted quickly to leverage Crocs’ global footprint, innovative marketing and scaling infrastructure to take HEYDUDE to the next level – not just in the US, but also in Europe and Asia. Elaine appears to be applying her learnings from transforming and innovating Crocs’ global supply chain network to deliver rapid revenue growth for HEYDUDE. With a new brand identity – ushering in the next round of growth and innovation – they are laying the groundwork for HEYDUDE to achieve sales of €1bn by 2024, two credibly strong brands well positioned to meet the needs of our key consumers with our value and convenience proposition to fulfill. Consumer demand for both of our brands is exceptional and we expect both brands to gain market share in this dynamic environment. We remain incredibly confident in our long-term growth and ability to deliver world-class profitability.”
The Crocs reboot offers a front-row seat to random leadership and innovation lessons that CEOs can now learn from. How did Crocs become a zeitgeist performer with one of the most dramatic pandemic success stories of any company? Was this all planned? Yes right… of course not! How did you do that? The boring headline would be that they have risen to supply chain challenges and fulfilled a customer need for comfort and convenience. Not enough? Okay, like I say at the Kellogg School of Management, aside from the stories of a great team and culture, what else can we unpack here.
Opportunity Crisis Pandemic Playbook
Bumping into what most global brands and retailers see as a crisis — Crocs added there are opportunities. Elain recalls, “I worked with the leadership team for the first week to create a pandemic playbook. We pushed defensively and offensively. Defensively how do we feel about preserving our money? We don’t know what will happen. How do we manage our inventory much more streamlined? Offensive was how we are making the most of our ability to engage with consumers during this time when comfort, both physical and emotional, has become a very big deal. We have a deep history in the healthcare industry and we took the opportunity to give away 850,000 free pairs of Crocs to the healthcare industry.” Since March 2020, they have donated 1 million pairs of shoes to healthcare workers worldwide.
Upgrade your Digital First plans
And while the pandemic spurred them on, Crocs was already in a multi-year transformation process. They responded that they were against fashion to become fashion. Their transformation started in 2014-15 when they started focusing on being digital first. What does this often-used expression mean to you? It’s not just about selling shoes online, which is expected to account for 50% of sales by 2026.
As Elaine says, “Digital for marketing was a big part of how we built the brand. Our marketing team has been incredible at locking into what’s going viral and connecting with consumers where they are on social media. They’ve teamed up and worked with great brands, great artists and great designers who have pushed the business forward.” You may not know that rappers like Bad Bunny, Genz Z icon Justin Bieber and even Balenciaga are now collaborating with the brand, at that you may have only thought of as bulk goods up to now.
One of the things I admire about Crocs is that they not only do what many fashion shoe brands are and rush their ads onto TikTok and Snap, but they approached the fashion world as an outsider and became one of the few publicly traded companies that literally living and breathing digitally and culturally embedding into the soul of the company.
Digital First for Crocs also extends to the operation and use of AI, which they use for forecasting. Robotics has helped them scale very quickly in retail. “For us, digital is more than just a type of business, it’s really how we want to approach the growth and future of the company.”
Be truly global
Growing more than $1 billion in sales in a single year was due in part to their global expansion. They are now present in more than 80 countries, with EMEA and Asia offering significant growth opportunities. One of the reasons they acquired HEYDUDE, a US-launched comfort casual footwear brand, was that they saw the international potential. “We’re really making sure that we’ve built our connections with all of our offices and employees around the world and that we’re thinking about where we’re going, not just from a North American perspective, but really from a global perspective. Scaling at this level of talent, process and supply chain in a time of incredible disruption. It takes real flexibility and agility internally and an incredible level of collaboration and innovation to pull this off,” she says.
Adjustment and confrontation with reality in times of chaos
How can you grow if you don’t know if you will have the materials to craft your goods? “As the supply chain has become more volatile and unpredictable, it has impacted how we think about marketing launches around the world,” she says. “If you can’t count on goods to arrive on time, how do we change that approach? We made it our mission to face reality with the supply chain that has helped us. A lot of companies have taken a wait-and-see attitude while we wanted to be decisive very quickly.” She says: “If we deal with supply chain issues for a long time, we should figure out how to deal with them. We’ve reviewed our product line to ensure it’s streamlined, focused and that we protect novelty. We’re thinking about how to enable factories to run longer production lines by shortening the product line. Air freight is now a new part of the competition from a logistics point of view.”
“It took a lot of focus and prioritization,” she continues. “We had a real mantra of Smarter, Better, Faster. Smarter is how we handle data incredibly well, how we get access to see around corners and get better insights. Better means how we can work to find opportunities for improvement and create efficiencies that transform the way we work. Faster is a big Crocs theme. How do we react and make decisions with the best information we have, knowing we can switch later?”
Data brings speed
“A big part of our culture is quick decisions,” she says. “Be smart, use the data, think about the implications. And be focused and prioritized. We really want smart, sustainable growth. But we know what works about this company. What makes working for us so fun is that we move fast and put things into action. A big part of our conversations right now is how we build in sustainable processes and practices that we can scale, with the ability to still change quickly to respond to the market, and maintain the mindset that we don’t have it all have found out . So we better be willing to change for a penny.”
Indeed on a dime.