The executive summary aims to analysis whether the Crocs's stock, after the recent 36% decline, is still worth investing.
When the market price plummeted in 2007, many investors lost faith because the management of Crocs is relatively young and thus unproven. Therefore it is fundamental that the track of Crocs's management be analyzed.
The Crocs management proven to be vary competent. Since establishment it has been focusing on three issues: counteracting the market and industry risk; decreasing production costs; adapting market trend. Firstly, it is notable that in footwear and apparel industry, large retailers with strong bargaining power shift inventory-holding risk to manufacturer while grasping other benefits. But Crocs has successfully developed a variety of distribution channels that dissipate the retailers' impact, improving the inventory turnover(See Chart 1). Moreover, while in 2007 the shrinking US economy led to the general market recession, Crocs still managed to exceed the profit expectation thanks to its global marketing strategy. It is expected that its markets in Brazil, India and China will bring significant revenue growth in the future. Secondly, to minimize production costs, Crocs substantially and successful depends on third-party-operated factories for footwear production and the acquisitions of smaller corporations like Foam Creation and EXO that offer special materials or intermediate products. As can been seen in Chart 1, the Cost of Sales/Sales ratio was decreasing from 2003 to 2007. Thirdly, through several acquisitions, Crocs has been increasingly featuring product customization and environmentally-friendly nature for its products, thus guaranteeing their future market occupation.
Financially speaking, Crocs is doing well in general in the recent two fiscal years. It is observed in Chart 1 that the solvency ability of Crocs enjoyed remarkable...