Consistent with the popularity of Crocs and perforated shoes among Chinese consumers, Crocs does sell well in China.
According to the financial report released by Crocs’ parent company on May 7th local time, in the first quarter of 2024, Crocs’ revenue in Chinese shopping malls increased by three digits year-on-year. This is even better than the previous quarter’s performance. In the fourth quarter of 2023, Crocs’s revenue growth in China was 80% higher.
It is worth mentioning that the first and fourth quarters are not strong quarters for Crocs, and they usually perform better in the second and third quarters with higher weather conditions. Andrew Rees, CEO of Crocs, stated in the financial report that considering this, he believes that Crocs will continue to maintain strong growth in Chinese shopping malls in the second quarter of 2024 and throughout the year.
The performance of Chinese shopping malls has to some extent boosted the overall success of Crocs. In addition to its main brand Crocs, the company also has the leisure shoe brand HEYDUDE, which was purchased at the end of 2021, accounting for about 20-30% of the total sales.
In the first quarter of 2024, Crocs Company’s revenue increased by 6.2% year-on-year to 939 million US dollars (approximately RMB 6.79 billion), and its net profit increased by 1.9% year-on-year to 152 million US dollars (approximately RMB 1.1 billion); The gross profit margin was 55.6%, an increase of 1.7 percentage points year-on-year.
This is the 15th consecutive quarter of revenue growth for Crocs company.
The achievements of Crocs company have been rapidly climbing since the second half of 2020, mainly driven by the participation of HEYDUDE and the addition of the main brand Crocs. Eliminating the impact of purchasing HEYDUDE, from 2020 to 2023, the annual revenue of Crocs single brand increased from 1.386 billion US dollars to 3.013 billion US dollars, with an average annual compound discount growth rate of 29.5%; However, from 2016 to 2019, its annual compound discount growth rate was only 5.9%.
Image source: Kuangda
The growth of Crocs in recent years has benefited from the popularity of leisure trends around the world – another example that can be seen is Birkenstock, also known for its comfort, which had an average annual compound discount growth rate of about 27% from fiscal years 2020 to 2023. On the other hand, it is also due to Crocs increasing its participation in products, supply chain, and marketing, and exploring additional space in domestic shopping malls.
At present, Crocs’ shopping malls have opened in North America, Asia Pacific, Europe, the Middle East, Africa, and Latin America. Domestic shopping malls outside of its headquarters in North America have been the main source of energy for Crocs in recent quarters. In the first quarter of 2023 and 2024, the revenue growth of Crocs North American shopping malls was 8.1% and 9.0%, respectively, while the growth of domestic shopping malls was 21.7% and 21.3%.
A more obvious manifestation is that the proportion of business development in North American shopping malls has been declining year by year. From 2021 to 2023, the operating ratios of Crocs North American shopping malls were 67.2%, 61.8%, and 59.0%, respectively. In the first quarter of 2024, this number further declined to 51.5%.
China is also one of the important growth engines among them. Crocs does not separately disclose the business development of Chinese shopping malls in its financial reports, but in the past year or two, Chinese shopping malls have been repeatedly criticized by name.
Decomposing the information disclosed by Crocs in its previous financial report, from 2021 to 2023, Crocs achieved double-digit growth in revenue in China every year. 2023 was a particularly good year, and Crocs had expected Chinese shopping malls to grow by about 30% in 2023. However, it ultimately achieved a triple digit increase, with revenue of $120 million (approximately RMB 870 million), accounting for approximately 4% of the company’s total revenue. In 2018, Chinese shopping malls contributed approximately 5% of their total revenue, which was over 50 million US dollars.
On a large scale, this is the result of Crocs considering China as an important potential addition point and increasing its participation. In 2021, Crocs shifted its focus on resource revenue towards digitization, Chinese shopping malls, and product marketing. The actions in Chinese shopping malls include signing celebrity spokespersons, optimizing mutual aid partners in departments and provinces, innovating stores to attract customers, and focusing on channels for Tmall’s actions.
The outside world can also feel the marketing actions of Crocs in Chinese shopping malls in recent years, including the launch of “dual endorsements” after Yang Mi and Bai Jingting. Liu Yuxin and Wang Junkai are invited to serve as global brand spokespersons, while also preserving China’s regional spokespersons and brand ambassadors; We have also frequently observed actions such as launching new co branded products and cross-border marketing with other IP categories.
Expanding channels is also one of the key factors contributing to growth. Crocs primarily operates through retail rather than direct sales on a global scale. In the first quarter of 2024, 78% of its domestic shopping mall sales came from retail channels. Crocs does not disclose the number of stores in a single shopping mall, but Andrew Rees stated in the latest financial report that he will continue to develop channels in Chinese shopping malls and plan to open a large number of franchise stores with mutual assistance partners in 2024.
At present, the growth of Crocs in Chinese shopping malls mainly relies on its participation in marketing, products, and channels to enhance brand and product strength, and optimize shopping experience. However, considering the durability and strong efficacy of Crocs products, the short-term repurchase rate is limited by this, and its highly independent marketing actions bring exposure and freshness. The duration of the “Dongmen” trend will be a major factor in Crocs’ long-term performance in Chinese shopping malls.
In addition, Crocs does not have a price advantage among similar products. On the Chinese e-commerce platform that is not lacking in replacement, there are a large number of perforated shoes and shoe flower accessories priced far lower than Crocs, which occupy a larger share of the lower tier shopping malls. According to the latest financial report from Crocs, the average selling price of the Crocs brand increased by 11% to $23.36 (approximately 169 yuan) in the first quarter of 2024. But Andrew Rees stated that there are no new plans for price declines this year.