Crocs’ bold embrace of their unique aesthetic is proving successful.

Unlock the Editor’s Digest for free

One of this year’s top-performing stocks may just be sitting at the back of your shoe closet.

Love them or hate them, Crocs — the maker of colourful, albeit aesthetically polarising foam clogs — has gone from a laughing stock to a good stock. The shares are up 55 per cent in the past year. That handily tops Nike’s 23 per cent decline and beats the performance of Big Tech names such as Apple, Microsoft and Alphabet.

Crocs was an early pandemic winner. Sales tripled to almost $3.6bn between 2019 and 2022 as Americans stuck at home ditched their heels and leather loafers for more comfortable footwear. The company has not looked back since and is forecast to pull in $4.1bn in revenue this year.

Its secret: staying ugly and irreverent. The clunky shoes, which resemble a collision between a flip-flop and a plastic colander, have been a staple for nurses, food service workers and home gardeners alike since their launch in 2002.

But under chief executive Andrew Rees, who took the helm in 2017, the company made a push to broaden its appeal. Collaborations with artists and brands such as Post Malone, Bad Bunny, the NBA and even KFC have made Crocs a fashion must-have among younger shoppers. Savvy social media marketing, investment in ecommerce and roaring sales of Jibbitz — tiny decorative charms that Crocs fans buy to personalise their shoes — have also contributed to the company’s strong sales growth.

See also  Nigerian banks rush to increase capital following directive to strengthen balance sheets

Despite the share price gains, Crocs shares do not look expensive. The stock is trading on just 10 times forward earnings. Deckers Outdoor — whose own ugly-shoe empire of Uggs, Hoka trainers and Teva sandals helped it deliver blowout quarterly results this week — commands a multiple of almost 30 times; Nike and Birkenstock similarly.

HeyDude, the casual footwear maker that Crocs acquired for $2.5bn in 2022, may be to blame for the discount. Crocs has struggled to turn around the business, which has weaker margins and sales than its namesake brand. HeyDude’s revenue, down 19 per cent last year, fell another 11 per cent during the first six months of the year.

This also means improvements at HeyDude could be a catalyst for further share price gains for Crocs. It is a similar story for the company’s debt. Net borrowings stood at $1.7bn at the end of June, compared with $750mn at the end of 2021, before the HeyDude deal. The company has been deleveraging and should continue to do so. It may not be fashionable to say so but Crocs is looking pretty good.

[email protected]