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Crocs Puts Best Foot Forward in Restructuring

Tickers in this article: BX CROX KKR

NEW YORK (The Deal) -- Crocs said late Monday it would exit badly performing stores, slash jobs, and streamline operations, sending shares of the plastic clogs retailer up more than 12% on Tuesday.

Niwot, Colo.-based Crocs said it would explore strategic alternatives and terminate product development of unspecified non core brands; shut down or convert between 75 and 100 company-owned storefronts - 18 of which will be impacted in the second quarter of 2014; and cut 183 jobs, most of which will be implemented immediately.

"The No. 1 priority is improving the operating margins of the business, focusing the organization on the right products and right geographies," Crocs CFO Jeff Lasher said in an interview Tuesday. "We have a couple of business units that we're not really sure make sense for us going forward," he added, noting this could refer to pure brands such as its Ocean Minded slip-on shoes and sandals or other more product line-oriented units.

The strategic plan will help the company reach 12% operating margins over time, Crocs said. The reduction in headcount is expected to result in $4 million in savings in 2014 and $10 million in savings in 2015, while store exits will trim sales by between $35 and $50 million. Lasher said between 25 and 30 of the store closings will be in the U.S.

"There is now a very publicly detailed strategic plan," said Steven Marotta, a footwear and apparel analyst with C.L. King & Associates. "Crocs has a high profile partner in Blackstone, a high quality president in Andrew Rees and a new CEO yet to be named - that's a nice recipe for investors to get excited."

The news sent shares of Crocs, trading on the Nasdaq, up 12.4% to finish at $16.68 Tuesday, bringing the company's market capitalization to about $1.46 billion.