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Blackstone's plans for Crocs: a race for profitability

By FashionUnited

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Fashion

ANALYSIS_ Six months in the business and it seems that Blackstone's 200 million dollars investment in Crocs, sealed in December, has come with a price higher than expected. The investment firm will shut down nearly a fifth of the brand stores worldwide and reduce its staff.



In December, the private equity giant Blackstone invested 200 million pounds to help revive the firm and took a 13 percent stake.

Half a

year later and after seeing profits halved in the second quarter to 19.5 million dollars, the comfy footwear company's president Andrew Rees said the firm needed “dynamic change” in its “strategy, organisation and approach to the market”.

Crocs reported second-quarter profits cut by almost half, although sales edged up 3.6 percent to 377 million dollars.

Less styles, shops closures and larger investment in advertising for Crocs

Facing the financial struggle and the deeper issue (their shoes are so robust that clients don't need to buy a new pair in a very long time), Crocs had decided to leave any plans to deploy new lines of more fashionable leather boots and dressier footwear and concentrate on sandals, loafers and other casual shoes.

It will also cut the number of styles available by up to 40 percent and invest heavily in advertising, boosting its advertising spending by 50 percent.

Additionally, about 100 of its 620 stores around the world will close. So far, Crocs did not reveal the locations of the closures. Across Europe, Crocs has more than 115 company-owned and 98 franchised stores, with three shops in the UK – out of the planned 30.

With the reduction of its commercial network, Crocs expects sales to be initially reduced by up to 50 million dollars.

On a positive note, Wall Street reacted positively to the restructuring plan, sending Crocs shares up by 11 percent to 16 dollars a piece. Founded in 2002, the group listed in 2006 at 21 dollars a share.

Crocs