Update, Feb. 5: Crocs said it would relocate and expand its corporate headquarters to Broomfield, Colo. in 2020 after more than a decade in Niwot, Colo. The move is part of a long-term growth plan, which includes the addition of new talent and employee retention.
Andrew Rees has done a lot of heavy lifting.
The executive, who has helmed the Crocs brand since 2017, spent most of the past two years orchestrating a mega turnaround for the Niwot, Colo.-based manufacturer of lightweight clogs. (Rees joined the brand in 2014 as president and was appointed CEO in 2017.)
Just before he took the top post, fragmented marketing, unproductive stores and a departure from its core product had led the company to a stretch of uneven sales. The waning momentum resulted in several quarters of losses.
Under Rees’ watch, Crocs ditched about 170 underperforming stores, cleaned up distribution, refocused on its Classic clog and upped its investment in digital marketing and hot collaborations.
The results? An earnings recovery, a sold-out partnership with Post Malone and a return to Wall Street’s good graces.
“Crocs is finally driving top-line growth again — and that’s despite the fact that they’re losing sales from all the store closings,” explained Susquehanna Financial LLLP analyst Sam Poser. “They’re managing the segmentation and distribution of the brand better than they ever have, and now they’ve caught on with young kids — primarily girls — as a high school fashion [trend]. Andrew was a huge part of that [transformation].”
And by his own tally, Rees is just getting started.
“This is a brand that has a tremendous long-term runway on a global basis,” the CEO said when FN sat down with him recently at his office in Boston. “I don’t think the external community necessarily looks at it like that yet. [Meanwhile], the investment community is just starting to come to the realization that what we’ve been saying might actually be true. In the next 12 to 18 to 24 months, you’ll start to see the [both of these groups] come to [align more closely] with our perspective.”
Here, Rees talks about turnaround obstacles, big priorities and getting back to the brand’s core.
What factors have been most vital in Crocs’ recent return to growth?
“It’s coming from two sides: One side is cleaning up excess distribution and being focused on the channels we think are effective for us. The other is having the right product in the marketplace that reflects the brand values that we’re proud of and product we’ve spent a lot of time and energy developing. Overall, the most important thing is brand elevation.”
When it comes to product, what are your top priorities?
“We’re focused on two things: clog relevance and sandal awareness. On the clog side, we don’t have an awareness problem. People know who Crocs is and what we stand for. On a global basis, people immediately associate the brand with that clog product and silhouette. So we want to grow that to be more relevant to more people and have them wear the clogs on more occasions. On the sandal side, for many years, Crocs has had great success in [this area], but it’s been a smaller part of our business. We haven’t amplified it and accentuated it. There’s a $23 billion global business for casual sandals where we can compete. [Our share is] a fraction of 1 percent, so there’s a long runway for growth.”
What drove the decision to refocus on Crocs’ roots, its classic clog business?
“In the early days of developing this strategy, Michelle Poole [Crocs SVP of global product and marketing] and I recognized the company was focused in way too many areas — some [of which] had zero chances of success. Golf shoes are one example. We were doing lots of different things, and some of those were bad ideas. What we tried to do [more recently] is get the company focused in on some clear, big ideas where we have a high chance of success.”
Are you worried that consumers won’t buy into Crocs as a sandal brand?
“Crocs is synonymous with the clog from a consumer perspective, but [people] have also [used their awareness of the clog to] derive some important attributes about the brand [such as] color, comfort, easy on and off, versatility and incredible value. Those [concepts] can be easily be applied to sandals.”
Why did you decide to close 170 stores?
“It’s evident that the consumer is shifting to digital shopping: Those changes are very significant in the developed Western world, and they are dramatic in the developing world. If you look at China, India, Indonesia and other places, the consumer is leapfrogging right to digital shopping. The second thing is, stores are a very high-cost fixed infrastructure that are expensive to maintain. We felt like it was a logical choice to downsize the retail footprint and put all our emphasis on digital shopping and move in that direction.”
At the same time, you’ve place a substantial focus on outlet stores. What’s the goal there?
“As we’ve closed stores, our outlet to full-price mix has risen. We think the outlet channel is an effective way to continue to market and sell the brand in an environment that’s far more cost effective to operate and has a more compelling long-term consumer proposition than a full-line model. Our outlet business is now more than 50 percent of our overall retail business.”
How has Crocs marketing evolved as you transformed the business?
“We needed to spend more as a brand to ignite our customer base and maintain strong connectivity — and architect a marketing strategy that was more effective at getting in front of consumers. We did three things: We went all digital, partnered with key global ambassadors [such as] Drew Barrymore and John Cena, and we [started] using a broad roster of local influencers in each market.”
How much of your recent success do you attribute to the rise of the “ugly” shoe trend?
“I don’t think it hurts us, but I don’t think it explains our recent success. There is something deeper around what’s going on with Crocs and our connectivity with our consumers. We also think there’s a life stage component to it. The brand is 18 years old now. Around the world, particularly in the U.S., the teenagers that are now buying Crocs for themselves actually grew up in the shoes — for the vast majority of those kids, their first shoe was the clog because that’s when the brand took off and became very hot. For them, it’s not an alien concept. It may be a concept they moved away from for a period of time, but it’s not an alien concept.”
What were the biggest obstacles you faced in orchestrating Crocs’ turnaround?
“I put the challenges in a few buckets. One is, the senior team was very weak — they lacked experience in branded consumer goods, footwear and in this industry. The second thing was, there was disbelief in the approach. We had a vision for how the brand should move forward and how the company should operate, and in many cases, that vision was diametrically opposed to the previous strategy. There were also a lot of things that were just broken: Manufacturing didn’t work very well, stores didn’t make money, wholesale customers were overstocked, distributors were not paying their bills.”
How did you navigate the pushback?
“We had to change the team, get everyone to believe in the strategy, and then we had to fix the broken things one by one. Since [our new] strategy was so different, it took a long time to embed it and have it be accepted and understood. People needed to see success before they said, ‘That makes sense. I can go down the road with that.’”
What keeps you up at night?
“My biggest worry is transitioning [everyone] to thinking about the brand differently and being able to grow it more aggressively. We’ve done tremendous work in terms of simplifying things and cleaning up the business. We’ve demonstrated our ability to grow and elevate the brand and propel it forward. This brand can be far bigger than it is today — globally. Now it’s [about] changing our culture and mindset into a growth mode versus a fixed mode.”
