Friday, March 20, 2009

Crocs: On Its Last Legs?

Crocs--which makes those colorful plastic shoes with the big holes--is in trouble. Not just because of rampant knock-offs, but because fashion is fickle and money is tight. The company's auditor has expressed doubt about its ability to "continue as a going concern." Here's the management discussion from the Crocs annual report.

It's not an uncommon story: Ramp up to handle high demand while in style, then sit looking at unsold inventory when demand plummets. Without new styles to feed fashion appetites, Crocs can't build revenues and profits for a healthy future; without cash or credit to fuel product development and promotion, Crocs can't survive. By April 1, the company's credit facility will expire, possibly taking the company down with it.

Crocs doesn't stand alone. Jibbitz, which makes accessory charms that fit in the holes of Crocs shoes, might have a rough time if people can't buy Crocs. Some 5,000 stores worldwide won't be carrying Crocs if the company fails. Not a happy ripple effect, especially in this economy.

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