In a move to cut costs, Crocs is shifting its entire production to third party manufacturers.
On Tuesday’s earning call, Crocs CEO Andrew Rees said in connection with the company’s ongoing efforts to simplify the business and improve profitability, it closed its manufacturing facility in Mexico in May.
And Crocs moved ahead with plans to close its last remaining manufacturing facility located in Italy in June.
“I want to thank each of our Italian employees for their dedication and commitment. They are talented individuals whose contribution to the company since its earliest days has been greatly appreciated,” Rees added.
The closing factories manufactured less than 10 percent of Crocs’ products, Steven Marotta, an analyst at CL King & Associates, told CBS News. “Their supply chain is very strong,” he said. “That itty-bitty amount of [shoes] can be easily absorbed through the supply chain.”
News of factory closures confused Crocs loyalists on Twitter. Fans interpreted the news as Crocs was shutting down its entire business. Though the company did not clarify where exactly it was manufacturing, Crocs replied to one concerned fan with “False Alarm: We aren’t going anywhere.”
FALSE ALARM: We aren’t going anywhere 😎
— Crocs Shoes (@Crocs) August 8, 2018
In fact, Crocs just came off a positive second quarter. Boosted by a wave of press and an effective campaign with Drew Barrymore and interest in its new LiteRide franchise, sales grew 4.7% to $328 million last quarter compared with a year ago.
The growth was achieved despite the loss of approximately $22 million due to operating fewer stores and business model changes. Crocs’ e-commerce grew 23.8%, wholesale grew 7.2% and retail comparable store sales increased 7.1%.
“I’m very pleased with our most recent quarter. Revenues and gross margin exceeded our guidance, and our diluted earnings per share were 75 percent above last year’s second quarter based on the strength of our product and the growing demand for our brand. Our clogs and sandals continue to perform well, and we are well positioned for the back half of the year,” Rees said.
During the same call, Crocs EVP and CFO Carrie Teffner also announced her intention to resign to pursue strategic board and advisory work. Zappos.com CFO Anne Mehlman has been named her successor effective Aug. 24.
Crocs’ shares dipped 2.65% to $17.64 Tuesday after the announcements were made. The stock rose more than 3 percent to $18.96 in Thursday afternoon trading.