Crocs Losing Patent Battles, Now Losing Sales
The Rocky Mountain News bestowed the kiss of death on Crocs over the weekend. Joyzelle Davis and David Milstead led their feature with a seventh-grader who has outgrown her two pair of Crocs and doesn't plan to replace them.
"Crocs aren't big in my class anymore," said Camille Kintzele.
The International Trade Commission just affirmed a court ruling that competitors' shoes don't infringe Crocs' patent, and the European Union called another patent invalid, reporter James Paton adds. Crocs has persevered, recently filing an infringement claim against Skechers. Among other things, Crocs claims that Skechers' bear logo is "confusingly similar" to its crocodile logo.
In the second quarter, sales fell for the first time in the company's history, indicating more pervasive problems. Crocs laid off 75 people at its Niwot, Colo., headquarters in August. It closed its Fury sporting goods division and has scaled back on its clothing ventures. Jibbitz founders Rich and Sheri Schmelzer resigned to spend more time with their family in July.
In a second-quarter earnings call, Crocs CEO Ron Snyder blamed high litigation costs for increased operating expenses and poor weather for slower sales.
At $4.81 today, Crocs stock continues to drift toward the cellar, down from a high of $74.75 last Halloween. But Snyder told analysts that sales are growing 20 percent per quarter overseas -- which accounts for 58 percent of its total sales -- and in company stores and outlets. The high-fashion You by Crocs line is also gaining traction, he said, and Crocs will adjust its retail strategy to focus on outlets it can control.
Marshall Cohen of NPD Group thinks the core clog has reached market saturation.
"Crocs built a product that has a lot lower level of obsolescence. They weren't ever really in style, so they don't go out of style. And they last a lot longer than other shoes," he said. "Everyone who would've reached over the fence and purchased Crocs pretty much already has."
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