Here is how Crocs avoided some of the pain of supply chain issues

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Dina Rudick | Boston Globe Getty Images

The chaotic global supply chain is hurting retailers, from shoe brands to department store chains, and threatening their performance this holiday season.

But Crocs said it has developed a manual to mitigate the impact in response to the crisis. On Thursday, the company’s third-quarter earnings and sales exceeded Wall Street expectations, and Crocs raised its full-year revenue forecast. The news caused Crocs’ stock price to soar; the stock has recently risen by about 7%.

CEO Andrew Reese explained on the earnings call that a key advantage is that retailers’ clogs are easy to manufacture, so the company faces fewer obstacles when transferring production when needed.

“Our shoes are really simple, so [swapping] The factory can be very, very fast,” Ress explained. “The classic clogs have three components, two of which are manufactured on-site, so you don’t have a lot of external logistics to start. We think we are capable of rapid manufacturing. “

Crocs quickly began to diversify overseas manufacturing, especially when factories in Vietnam faced prolonged shutdowns due to the pandemic blockade in the region. In the short term, the company said it has moved part of its production back to China and Bosnia. It is also increasing production in Indonesia, and its plant in India is expected to go online next year.

Vietnam has traditionally represented an important part of Crocs manufacturing base. The company said that by the end of this year, its output will account for about 70% of the total output, but due to Crocs’ diversification efforts, the output will decrease.

According to Ress, as of this week, most of the retailer’s factories in Vietnam have resumed operations. He added that the workers are returning to the factory “very efficiently”. However, Ress said that Crocs is still carefully planning for the region to “open again and close again”.

At the same time, in order to avoid large-scale congestion at West Coast ports, the company said it has been building larger operations on the East Coast to reach its customers in the United States. Crocs has also been using air freight instead of cargo transportation to transfer orders in preparation for next spring and summer.

“We will prioritize our most important channels,” Reis said.

Crocs expects to face some inflation next year, mainly due to rising freight and wage costs. The retailer has slightly increased the prices of some clogs. The cancellation of promotional activities also helps to balance inflationary pressures.

“We are actively studying other measures and measures we can take to offset any inflationary pressures,” Chief Financial Officer Anne Melman told analysts.

So far, Crocs’ stock price has soared by more than 140%. The company’s market value is 9.3 billion U.S. dollars.


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