Crocs, Inc., the company that turned foam rubber shoes into a worldwide phenomenon, has announced it will be closing or converting 75 to 100 stores worldwide .
The shoe was invented in Quebec City, but then sold to Boulder, Colo., investors.
The Nasdaq-listed company announced financial results today, saying it wants to reap cost savings of $4 million in 2014 and $10 million in 2015 by closing stores and laying off staff. Crocs has laid off 183 people as of Wednesday, but more layoffs are expected.
Crocs plans to streamline its entire operation, including reducing its product line, reducing direct investment in smaller markets and revamping its organizational structure.
Crocs got a $200-million bailout from private equity fund Blackstone in 2013 and CEO John McCarvel stepped down.
"Crocs' performance in the second quarter demonstrates the underlying potential of our global brand and business and the need for dynamic change in our strategy, organization and approach to the market," Crocs president Andrew Rees said in a statement.
"Overall, revenue was in line with our expectations, and we have set a course for meaningful change going forward."
Net income falls
Net income attributable to common stockholders was $19.5 million, compared with net income of $35.4 million in the same period in the previous year. Revenue increased 3.6 per cent in the second quarter of 2014 to $376.9 million.
Crocs has experienced weak same-store sales in China and Korea, in part because of cheaper knockoffs of its products. It also is experiencing sustained weakness in the Americas.
Despite branching out into flip-flops, boat shoes and other casual shoes, the company failed to sustain the popularity it enjoyed in 2005 and 2006 with the original shoe, which was designed by a Quebec company that created the proprietary Croslite material of which the clogs are made.
"By clearly defining our core products, it will allow us to focus our growth initiatives around products where we are competitively well positioned for success, while exiting less profitable products and business lines, thereby maximizing our profit growth potential," Rees said.
18 stores gone
Crocs said it has already closed 18 stores or converted them to “partner stores” in which another retailer sells the Crocs brand.
The company said it will focus on “various initiatives to improve four-wall retail store performance” and improve same store sales.
The impact of these closures and conversions is expected to reduce annual revenue by approximately $35 to $50 million.
Crocs announced plans to open a Global Commercial Center in the Boston area in late 2014, housing key merchandising, marketing and retail functions and attract experienced senior footwear and retail management talent.