While others struggled, footwear companies like Crocs, Genesco and Rocky Brands have taken advantage of the pandemic and outpaced competitors.
At this year’s virtual ICR Conference, the shoe makers summed up their projected full-year earnings, discussed their 2020 experiences and offered a look at plans for the future.
In-store sales at Genesco surpass expectations
Although it still is seeing a year-on-year decline, Genesco, the owner of footwear retailers Journeys, Schuh and Johnston & Murphy, reported better-than-expected preliminary fourth-quarter results
After experiencing an 11 percent decline in sales during the third quarter, president and CEO Mimi Vaughn said Genesco had anticipated that smaller crowds on peak selling days would drive sales down a little bit more during the holiday season. With a 49 percent spike in e-commerce sales offsetting a 14 percent drop in comparable in-store sales, total comparable sales for the eight weeks ended Dec. 26 only slipped 3 percent. Due to store closures—Genesco’s Scotland-based Schuh brand operated for approximately 50 percent of fiscal November and December—overall sales during this period ended up declining 8 percent, an improvement on Q3.
In particular, Genesco’s Journeys and Schuh brands, both aimed at teens and young adults, “performed quite well,” Vaughn said. “Young customers are not as affected by the virus, they’re more willing to be out and about. Teens have always been interested in comfort and accessible price points and that’s absolutely what we offer.” Though the company’s dressier Johnston & Murphy brand continued to underperform—comparable sales slipped 34 percent—it still improved on the third quarter’s 43-percent drop.
While much has been rightfully said of e-commerce’s role throughout the pandemic, Vaughn said Genesco’s customers, especially its younger shoppers, “really do like that in-store experience.” When stores reopened in May and June, she said, pent-up demand and stimulus money led the company to positive store comparisons.
Related Stories
“It’s great to be a consumer these days because you can pick and choose exactly how you want to interact with us,” Vaughn said. “Even over the holiday period, we were quite pleased with our online sales, but it was the store sales at Journeys that really put us well over where our expectations were as far as sales were.”
Bankruptcies in the U.K. market, though ominous for retailers, have created new possibilities for Schuh. “Out of all of this chaos that is happening within the U.K. market, for those who survive, there is a lot of opportunity,” Vaughn said. And while stores continue to remain closed in the country, she said the brand has been able to pick up sales online.
“The good news in the U.K. is that first of all, their vaccine program is rolling out,” Vaughn said. “They have a National Health Service, which is the vehicle for being able to make that happen, and they’re very committed to rolling out a vaccine sooner rather than later. And in addition to that, the terms of a Brexit deal were struck with the E.U. and so there’s a bit more certainty around what will be the U.K.’s positioning vis-à-vis the E.U. going forward. So those couple of things will allow us to have some wind in our sails as the year unfolds.”
Sufficient supply fuels customer gains at Rocky Brands
Declining to offer anything specific about his company’s fourth-quarter results, Rocky Brands president and CEO Jason Brooks simply said the boot giant feels “good about the momentum.”
Part of this positive feeling, Brooks said, derives from customer gains the company pulled in over the past year as it managed to get a leg up on competition by keeping its shelves full. “We really didn’t see a downfall in carrying that inventory,” Brooks said. “We sell the same boots year over year, right? We don’t need new fashionable-type styles, so the risk seemed really low and it really seemed to work out for us.”
Rocky Brands’ manufacturing capabilities played a notable role in keeping its boots in stock. Unlike many of its competitors, the company, which owns the Georgia Boot, Durango, Lehigh Outfitters and eponymous Rocky brands, manufactures a portion of its own inventory. So when factories reopened and competitors that had canceled purchase orders from Asia began chasing inventory again, Rocky gained “a huge advantage” by simply being able to dictate what it was manufacturing and when, said chief financial officer Tom Robertson.
On top of this, the pandemic coincided with a years-long push to move production out of China and instead make additional investments at Rocky Brands’ facilities in the Dominican Republic and Puerto Rico, where just under half of the company’s product is now produced, Robertson said.
“The [Dominican Republic], in my opinion, is an exceptional asset,” Brooks said. “It’s like two weeks to get product from there to our [distribution center] and it takes more like 35 days to get it out of China. So, from an inventory standpoint, timing standpoint, that’s a huge benefit.”
Lead time “is very critical particularly when you’re chasing inventory because 25 days of a product missing on the shelf is a huge impact in retail,” Robertson added.
By simply being in stock while other brands weren’t, Brooks said Rocky Brands was able to acquire new business. “We are really excited about the new customers that we have acquired during this,” he said. “We are going to invest in driving that relationship, mainly around social media and online and through your phones, but we are going to make some investments there and really push that growth.”
Despite the tough year-over-year comparisons Rocky Brands will likely face in the back half of the year, Brooks said the company feels “pretty comfortable” about continuing in the direction it had been going before the pandemic. Robertson offered some firmer, but still informal guidance, ballparking wholesale improvement in the low- to mid-single digit range and retail growth in the low double digits.
Crocs touts collabs, Jibbitz
After projecting full-year 2020 revenue growth of approximately 5 percent to 7 percent less than three months ago, Crocs updated its guidance Monday to more than 12 percent. In the fourth quarter alone, it now expects revenue to jump 55 percent. These updates return the company’s full-year guidance to pre-Covid levels, CEO Andrew Rees said.
“While 2020 has been a tumultuous year for us all, it has been an incredible year for Crocs, and I would say the Crocs brand has flourished,” Rees said.
Like many others, e-commerce growth played a substantial part at Crocs. Digital revenue—defined as direct-to-consumer sales from Crocs’ website and third-party marketplaces, as well as wholesale revenue from e-tailers like Amazon—jumped 50 percent, resulting in digital penetration of 42 percent.
One of Crocs’ key brand and marketing strategy has been its collaborations, Rees said. After a busy year that has seen the brand team up with the likes of Post Malone, Justin Bieber and Bad Bunny—that’s just since September—Rees said Crocs plans to maintain the same level of collaborations in 2021, while shifting “a little bit more global and regional.”
“I think they are really impactful, we have not seen any evidence as we look at their performance, of them slowing down,” Rees said. “We do think it’s important to put a lot of time, energy and creativity into them—they’ve got to be special, right? If they’re not special, I think you do run the risk of consumer fatigue.”
One of the more unique elements of Crocs’ business—the Jibbitz embellishments that personalize the foam footwear—really picked up steam last year, doubling in revenue compared to 2019, Rees said. Though the greatest dollar growth came from North America, home to its largest base of Jibbitz consumers, the CEO said Crocs has “seen extremely rapid adoption in critical Asian markets.”
“The dollars are helpful, it’s very high margin as everybody knows, but really the key issue is consumer engagement,” Rees said. “You take a generic purchase of a white clog and you turn it into a completely personalized purchase.”
While Crocs’ iconic clog business thrived in 2020, its smaller sandal business had a tougher time. “We canceled a lot of receipts associated with sandals and didn’t have much of a sandal season,” chief financial officer Anne Mehlman said. This year, however, Mehlman said Crocs anticipates this trend will reverse course. “We do still expect the clog to be strong for 2021, but we will see sandals grow this year,” she continued.
Like many other companies, Crocs is investigating what it can do to make its business more sustainable. In addition to efforts to reduce transportation packaging, Rees said the clog maker is researching a resin feedstock made from renewable resources. “There would be some added costs but, frankly, as we’ve done work on it, it’s less than we thought it would be,” Rees said.
On the whole, Rees said Crocs is looking at 20 to 25 percent growth in 2021. “The backlog that we have currently, which obviously takes us through Q1, Q2 and into the early part of Q3, is strong,” Rees said. “It is part of what provides us [with] that confidence.”