Here’s how Crocs avoided some of the pain of supply chain issues

A snarled world supply chain is hurting retailers, from shoe manufacturers to division retailer chains, and threating their efficiency this vacation season.

But Crocs says it has created a playbook to handle by the disaster with mitigated impression. On Thursday, the firm's fiscal third-quarter earnings and gross sales smashed Wall Street estimates, and Crocs hiked its full-year income outlook. The information despatched Crocs shares hovering; the inventory was lately up about 7%.

Chief Executive Andrew Rees defined on an earnings name a key benefit is the proven fact that the retailer's clog footwear are straightforward to make, and so the firm faces fewer hurdles in shifting manufacturing round, when wanted.

"Our shoes are really simple, and so [swapping] factories can be very, very quick," Ress defined. "The classic clog has three components, two of which are made on-site, so you don't have a lot of external logistics to be able to get started. We think we're competent in terms of rapid manufacturing."

Crocs was fast to start diversifying its manufacturing abroad, particularly with services in Vietnam going through extended shutdowns attributable to pandemic lockdowns in the area. In the brief time period, the firm mentioned it has moved some manufacturing again to China and Bosnia. It's additionally ramping up manufacturing in Indonesia, and it has a facility in India anticipated to be on-line by subsequent 12 months.

Vietnam has historically represented a big chunk of Crocs' manufacturing base. It was anticipated to account for about 70% of manufacturing by the finish of this 12 months, the firm mentioned, however might be much less attributable to Crocs' diversification efforts.

As of this week, most of the retailer's factories in Vietnam are operational once more, in response to Ress. Workers are coming again to crops "pretty effectively," he added. But Ress mentioned Crocs continues to be cautiously planning for an "on again, off again" state of affairs in the area.

Meantime, to keep away from huge logjams at West Coast ports, the firm mentioned it has been constructing a bigger presence alongside the East Coast to succeed in its clients in the United States. Crocs has additionally been utilizing air freight as a substitute of cargo transportation to maneuver orders in preparation for spring and summer time of subsequent 12 months.

"We will prioritize our most important channels," Ress mentioned.

Crocs is anticipating to face some inflation subsequent 12 months, primarily from heightened freight and wage prices, it mentioned. The retailer has already barely elevated the costs of some of its clog footwear. Pulling again on promotions has additionally helped to stability out inflationary pressures.

"We're proactively looking at other measures and things that we can do to kind of offset any inflationary pressures," Chief Financial Officer Anne Mehlman informed analysts.

Crocs shares have soared greater than 140% 12 months up to now. The firm has a market cap of $9.3 billion.

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