Crocs Took a Page From Nike’s DTC Playbook — And It’s Already Paying Off
Crocs just posted another stellar quarter — and its direct-to-consumer sales were a major part of that.
The comfort-focused brand reported a revenue growth of 93% in Q2, with quarterly net earnings rising to $319 million, or $2.23 per share, on an adjusted basis, compared to last year with $56.6 million, or $1.01. Direct-to-consumer sales, which include sales from e-commerce and brand-owned retail stores, increased 78.6% year over year, making up 52% of Q2 revenues.
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In recent months, Crocs has focused on sharpening its direct-to-consumer business and slimming down on certain wholesale partnerships. In April, Crocs said it was ending business relationships with some of its long-time wholesalers to prioritize key partners that can elevate the brand’s position in the marketplace. This came shortly after Nike made similar moves to terminate wholesale accounts with Zappos, Dillard’s, DSW, Urban Outfitters, Shoe Show and more retailers.
Crocs and Nike are two examples of a general industry trend towards doubling down on a direct-to-consumer focus. For Crocs, soaring demand for product has allowed the shoemaker to be more selective about where it presents itself to consumers.
“They’re in a position where the brand is hot,” Steve Marotta, managing director of equity research at C.L. King & Associates, told FN about Crocs in April.
In a call with investors on Thursday, Crocs CEO Andrew Rees said that the company is being selective about how much and what type of inventory it will allow in the marketplace at a time to control Crocs’ brand image.
Rees described the direct-to-consumer push as an “important shift for Crocs,” and said the company was implementing “best in-class brand management practices,” something Williams Trading analyst Sam Poser highlighted in his analysis of the brand.
“Ongoing innovative product, marketing, collaborations, and brand management led to strong results and will lead to more in the future,” Poser wrote about Crocs in a Thursday note.
To be sure, Crocs is still maintaining strategic wholesale partners that serve the needs of the brand. Crocs reported that wholesale revenues grew 112.1% in Q2, and noted that its top 20 brick and mortar accounts performed well. But the direct-to-consumer arm remains a key area of focus.
“I’m sure there are the occasional wholesale partners that would like more products,” Rees said. “In fact, there are probably quite a few that would like more products, but this is an important part of managing the brand.”
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