Could Crocs’ supply chain mitigation steps work for others?
Crocs, facing both factory shutdowns overseas and port congestion in the U.S., on Thursday unveiled a multi-step plan to circumvent supply chain challenges and drive another year of strong growth in 2022.
The clog footwear maker reported that sales jumped 73 percent in the third quarter and raised its guidance slightly for the full year. Revenues are now expected to expand between 62 and 65 percent.
On an analyst call, Andrew Rees, CEO, also said wholesale bookings for the first half of 2022 “have been exceptionally strong,” and 2022 revenue growth is expected to exceed 20 percent. He said, “Consumer demand for our products is high.”
For the first half of 2022, however, Crocs expects to face “limitations around how much demand we can fulfill.” He outlined five steps Crocs is taking to minimize the supply chain damage:
- Production diversification: Crocs is shifting its sourcing from Vietnam to other countries, including China, Indonesia, India and Bosnia. Factories in Vietnam, which make up about 70 percent of production, were closed for several weeks during the third quarter due to COVID-19 spikes and began reopening in early October. Said Mr. Rees, “Today, most of our factories in Vietnam are operational, although they are in various stages of restarting. We expect the situation to remain fluid as the vaccination rates increase in the country.”
- Port diversification. The company is diverting some shipments to the U.S. to East Coast ports and northern ports on the West Coast to avoid the port congestion at Los Angeles and Long Beach. Said Mr. Rees, “We definitely have product on ships outside of Long Beach.”
- Prioritizing best-sellers: Crocs’ SKU count at the production level will be narrowed to focus on top sellers. Said Mr. Rees, “While still preserving newness, we’re able to improve factory throughput.”
- Prioritizing inventory by channel: Arriving inventory will be prioritized to support its three most important channels: owned e-commerce, third-party e-tail and its major wholesale customers.
- Leveraging air freight: Crocs plans to invest approximately $75 million in air freight to support 2022 spring/summer deliveries.
- Crocs, Inc. Reports Record Third Quarter Revenues – Crocs
- Crocs (CROX) Q3 2021 Earnings Call Transcript – The Motley Fool
DISCUSSION QUESTIONS: Which of the steps Crocs is taking to mitigate supply chain constraints make sense for other vendors and retailers to embrace? Are there maneuvers it might add?