Fueled by a 1000% rally in its stock price since the March 2020 lows, the love ‘em or hate ‘em rubber clog-maker Crocs was able to do a major acquisition last week that will not only broaden its stable of products but will give it a stronger toehold in the super-hot comfy-casual footwear segment.
In announcing its mostly cash $2.5 billion offer last week to acquire the Italian comfy casual shoemaker Hey Dude, the 20-year-old Colorado-based brand immediately moved closer to the front of its peer group and closed in on rivals such as Skechers and Deckers, the parent of UGG. The deal also adds distance between Crocs and newly listed upstarts such as Allbirds, which is currently worth about only one-third as much.
While Crocs has been through boom-bust cycles in the past, pandemic-era sales have been very strong. Even so, according to an investor PowerPoint, its product mix is heavily skewed towards its iconic clogs which still account for 71% of sales, with sandals, loafers, sneakers and Jibbitz shoe charms making up the rest.
As PYMNTS reported, an October forecast predicts Crocs’ revenue is pegged to rise as much as 65% this year, lifting its annual sales about $2.3 billion — and that’s before the $500 million of additional revenue it just acquired. And of course, none of this would have been possible had Crocs stock not just gone from $8 to $125 over the past 20 months, lifting its market value to nearly $8 billion.
What’s Up, Dude?
Like Crocs itself, the comfy-casual segment is hardly a new phenomenon anymore and is filled with both massive global titans like Nike, as well as smaller niche brands like Tom’s, Kizik or NoBull that are heavily — if not exclusively — selling directly to consumers (D2C).
As far as what Crocs plans to do with its new baby, the company clearly aims to grow it — and leverage its D2C expertise and double Hey Dude into a $1 billion plus brand by 2024.
To put that into perspective, the company said the Crocs-Hey Dude combo gives it a quadrupled total addressable market of over $160 billion, which it aims to penetrate through a mix of scale, product innovation, existing wholesale relationships and expansion in Asia and EMEA countries. Both companies will also surely tout their shared commitment to sustainability.
Personalization Makes for Marketing Gold
One key advantage Crocs has going for it that Hey Dude may be interested in borrowing is the ability for consumers to customize their Crocs. Yes, consumers can now buy customized Hey Dude shoes through third parties on Etsy or eBay, but with a little planning those customization-seeking customers can now be kept in-house.
Similarly, over the years, Crocs has also been able to shoehorn its way into high fashion and other celebrity endorsements, such as its runway-worthy collaboration on a heeled Balenciaga version now available on the Bloomingdales website for $625. Celebrities such as Niki Minaj, Justin Bieber, and Kim Kardashian have all shown off personalized Crocs with stickers, glued on trinkets, and the like that express their personality and image.
If Hey Dude gets in on the celebrity endorsement train like Crocs have, this could be a key element of upping its brand profile and reaching more consumers to generate higher revenue.
Taken together, these shoe synergies will not only boost energy into the two brands but will also likely stoke a bit of fear and innovation into rivals, who are also looking for new ways to get a few more miles out of the comfy-casual trend while it’s still kickin’.