Crocs Before Private Equity Investment

Crocs was founded in 2002 by Lyndon Hanson, Scott Seamans and George Boedeker after a boating trip to Mexico convinced them that their prototype foam clogs provided fantastic comfort and function. The three founders took their new product to a boat show in Fort Lauderdale and sold out.

Milestones Leading Up to IPO

  1. Founders recruited Ron Snyder (old college friend) as CEO. He was previously an executive at Flextronics.
  2. Exploded in popularity with with anyone that has to spend a lot of time on their feet (e.g., hospital staff, restaurant workers, new parents).

The IPO  in February of 2006 was the largest footwear IPO at the time. The company’s market cap exceeded $1 billion. The share price continued to surge until October 2007 when the global financial crisis hit. By early 2009 the company’s share price had dropped from a high of $74.75 to a low of $1.20 in the span of just over a year.

Post Crisis: Popularity and Inventory Management

Declining revenues due to a declining economy were further impacted by what many considered a waning fashion fad. On top of that, efforts to keep up with demand before the crisis led to a significant inventory surplus that required the company write down $76 million in 2008.

Efforts to Manage the Crisis

  1. The company recruited John Duerden, who was previously an executive at Reebok
  2. Duerden eliminated 2,000 jobs and aggressively worked to reign in overexpansion
  3. Sales continued to fall and the company posted a $42 million loss in 2009
  4. Crocs board promoted John McCarvel, previously the COO since 2007, to CEO

The groundwork laid out by Duerden and built on by McCarvel took hold. In 2010 the company began to grow and turn a profit and the stock price climbed from a low of $1.20 (2009) to a peak of ~$29 in 2011.

Growing Out of the Crisis

  1. Number of styles: the company added 70 different styles between 2010 and 2012 for a total of 300
  2. Direct-to-Consumer channel: the company doubled company-owned stores to 600 between 2009 and 2013
  3. International expansion with a focus on Asia. By 2013 only ~33% of revenue came from the US

By 2013 concerns were being raised that history was repeating itself and that Crocs had once again over expanded. The company started to miss earnings estimates and talk of a private equity transaction surfaced.

crocs IPO private equity
Source: Victoria Ivashina, John D. Dionne, Terrence Shu | "Blackstone: Crocs Investment" | Harvard Business Review | 09/24/2020 | Visit