Crocs pays big to trash unsold clogs

The company just took a $3.4 million hit for 'obsolete inventory.' But it's still selling tons of shoes.

By MSN Money Partner Feb 21, 2014 3:35PM
Credit: © Niels Poulsen DK/Alamy

Caption: Heap of plastic Crocs shoesBy Kyle Stock, Businessweek

Crocs (CROX), in the midst of a corporate retread, is struggling to get out from under a pile of garish resin clogs.

Business for the tarnished shoe brand actually isn't as bad as one might expect. The company has built a long line of styles that are a big step away from the chunky, hole-punched hooves that made it a household name. 

This spring, for example, Crocs is putting a hard sell on men's golf shoes and women’s wedges and espadrillas. That product expansion is no doubt why Blackstone Group (BX) agreed to buy a $200 million stake in the company in December.

But as anyone with a bit of bright Mario Batali orange at the bottom of his closet knows, old Crocs are tough to get rid of. In the fourth quarter, Crocs wrote down $10.7 million in impairment charges, effectively canceling out 5 percent of its sales. 

Most of the one-time expenses were tied to its network of 619 retail stores, although Crocs had to take a $3.4 million hit for "obsolete inventory" -- the financial equivalent of tossing a bunch of shoes in the trash.

In part because of that housecleaning, Crocs posted a $66.9 million loss in the quarter, well above its $3.6 million loss a year earlier.

Believe it or not, the company is still selling tons of shoes: 10.7 million in the three months ended Dec. 31, which is 9 percent more than in the year-earlier period. 

That's almost one pair of Crocs for every person in Ohio, and only about half of those were clogs. In particular, the company made big strides abroad, more than doubling the pairs of shoes sold in Europe and posting a 22 percent increase in Japan. Total revenue, however, ticked up just 1.6 percent to $228.7 million, a sign that Crocs, on the whole, are getting a bit cheaper.

The challenge for Crocs remains wooing the U.S. customers who put it on the map a decade ago and have since moved on to TomsRainbow flip-flops, and increasingly Birkenstocks. In America, Crocs sold 8 percent fewer shoes in the recent quarter.

Meanwhile, the company said it won’t be providing profit guidance this year or answering questions during earnings reports. On Wall Street, that kind of coyness is considered about as fashionable as chunky clogs.

More from Businessweek

Feb 21, 2014 4:13PM
why not donate to charities and have a write off and benefit the poor instead of just trashing the shoes?
Feb 21, 2014 7:11PM
that is the most dumbest BS I've ever read.  Do they realize how many people have NO shoes.  There are tons of homeless shelters or foster care programs they could donate the shoes too.  WTF is wrong with people.  Why not do something good, why are they throwing out good shoes that can be worn by people who don't have any??? just stupid of them
Feb 21, 2014 4:44PM
Why not recycle and make something useful out of them? We've GOT to get RID of Wall Street and the paper/button pusher mentality.  
Feb 21, 2014 5:15PM
Crocs had to take a 3.4 million hit for "absolete inventory" the financial equivalent of tossing a bunch of shoes. They did not through out any shoes literally it's just another misleading story by MSN
Feb 21, 2014 10:02PM
Seriously people.  It's a write down of the value of their inventory because they'll have to mark it down to a fire sale price to get rid of it.   They didn't literally throw them in the trash.  Read the article - it's the "financial equivalent of tossing a bunch of shoes in the trash".
Feb 21, 2014 4:44PM

If you read the tax law, you will find out companies are supposed to write down old unsold inventory every year.  For those companies that are in states that tax inventories, reducing the value of old inventory also saves taxes.

Feb 21, 2014 5:57PM
Where I grew up no one wore rubber shoes except mental patients and inmates.  That's all I see when people wear them.
Feb 22, 2014 7:58AM
Obsolete inventory does not mean that the inventory is thrown in the trash. It is in most localities a tax deduction. I would suggest MSN reporters should clarify their comments and some readers should learn to read the fine print of these headline grabbing articles written in the style of the National Intruder magazine.
Feb 22, 2014 12:11PM

The mind boggles at how few people read and how even fewer comprehend the articles they comment on. Reading them seems to have become a daily affirmation of the fact that a good percentage of the population is clinically retarded.

Doctors and Nurses wear Crocs , my Dr. is worth millions and he wears them all the time, so I bought couple of pairs , they are great , wear to mail box and go get the paper.
Feb 22, 2014 11:30AM

Seeing all the comments of people who actually think they are throwing the shoes away really says a lot about the sad state of affairs in our country. really can't be that dumb...turn off your tv..start reading more and quit believeing everything you see on the likes of MSN or MSNBC.

Feb 21, 2014 9:22PM

They are the ugliest shoes every made.

Crocs are only acceptable for children and infants to wear any adult wearing these lime green ugly shoes is a clown.

Used Crocs will soon be clogging the landfills for millions of years.

Feb 22, 2014 2:50AM
Don't think they literally threw the shoes in the trash...maybe some of them will be donated. My seven year old and I love Crocs. They are the best shoes for the beach and the pool. I have several pairs, but not clog styles. They have some pretty cute styles for women, and the kid ones are pretty guess is that we will keep buying them...I think they're actually pretty addictive once you try them...
Feb 22, 2014 11:11AM
The number of people who comment on the headline alone, apparently without reading the article, never ceases to amaze me!
Feb 21, 2014 6:54PM
Feb 21, 2014 8:09PM
These things have got to be one of the ugliest shoes out there and with the price they charge I'll never buy a pair.... However I would try a pair for free and miracles do happen I might change my mind? 
Feb 21, 2014 6:22PM
They should have given them away. Buy a pair of shoes get any Crocs free, or 2 prs of Crocs.
Feb 22, 2014 11:09AM
I know people disparage the ugly clogs that Crocs makes but if you have arthritis, or any other foot problem then they are a godsend. I love my Crocs and would be just about non ambulatory without them. I'm kind of happy for this article, it lets me know that there should be some good sales around the corner. 
Feb 22, 2014 1:51AM
I LOVE my Crocs, I have been wearing them since I lived in Colorado when they came out. Pleasing to the eye- no not all styles but I still have my first pair for around the house wear because the are soft marshmallow goodness for my feet, but I wouldn't dare wear them to go to the store especially if it's been raining. No tread on crocs  in a wet smooth concrete environment means your going down like James Brown -been there. the article was not clear on what they did with the excess inventory but if I find out they just melted them or burned them I will be very pissed and will have purchased my last pair. They already had a program to give away used crocs to 3rd world people so why not give the new ones away also?
Feb 21, 2014 8:07PM
They couldn't give these shoes to people around the world who have none?  They would have been appreciated but instead Crocs gets my ire for its lack social responsibility.  PAC
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