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Crocs
- Crocs shares have soared 100% over the past year, far outpacing the performance of other publicly traded shoe and apparel makers.
- Analysts who cover Crocs say the brand has seen a revival among teens and has raised its profile in pop culture.
- Another more subtle component of the big gains may be a nostalgia factor, some analysts say.
- Watch Crocs trade live here.
"Crocs Making A Comeback."
That was the title of a note to clients published by Erinn Murphy, a senior research analyst at Piper Jaffray, last November. The brand's recent momentum, particularly among young consumers, would continue, Murphy forecast. She pointed to its collaboration with the rapper Post Malone, her firm's survey showing Crocs were gaining ground among teens, and the shoemaker's "improving digital capabilities."
Since then, the stock has proved Murphy and other bullish Wall Street analysts correct. Crocs shares have soared 48% over the past three months, bringing their one-year advance to an eye-popping 101%. That compares with the sneaker giants Adidas and Nike, who have gained 10% and 21% respectively over that time. Skechers has fallen 37%.
Listen to the latest Household Name episode, "Crocs: From Punchline to Fashion Line."
Aside from the Croc's collaborations with the likes of Post Malone, A-Life, and Balenciaga, analysts who cover the brand attribute the rally to a push toward marketing its shoes to younger consumers and pairing them with visible brand ambassadors like Zooey Deschanel and Natalie Dormer.
By Piper Jaffray's count, Crocs had six collaborations in 2018, two in 2017, and one in 2016. One of last year's pairings was with the luxury fashion-designer Balenciaga for high-heeled and platform Crocs. Rapper Post Malone twice partnered with the brand last year for new shoes that were quickly bought up. Crocs, which went public in early 2006, is now trading at just under $30 a share, near eight-year highs.
Another analyst who rates the stock positively, Susquehanna's Sam Poser, told clients last week that Crocs' strategic collaborations are "helping to raise brand awareness and expose CROX to a new, fashion-forward consumer." Additionally, he said there's significant room to grow its e-commerce segment and expand overseas, particularly in Asia.
In a note to clients last week, Piper Jaffray's Murphy pointed to another facet of the brand's allure: nostalgia.
"Teen resurgence is seen as a multi-year catalyst per mgmt..," she wrote. "We also believe this trend is benefiting from nostalgia (much like adidas Originals) as teens now wearing CROX grew up with the brand as children."
Susquehanna's Poser agreed that nostalgia may also be at play.
"If you think about it, there's something that you like today that brings back memories of something when you were a kid," he said in a phone interview. "If you think about Adidas track shoes, or any of that kind of stuff, there's all these different things that were popular then; you saw your big brother wearing it, or you wore it, and it just brings back memories.
"I think there's a good deal of that going on from when these teenagers, 10-plus years ago, were little kids, they wore Crocs, then they stopped, and now they're going, 'Oh I wore those, and I understand what those are,' and now I can sort of make them my own."
Read more: Crocs' popularity is skyrocketing among teens as ugly fashion takes over
Aside from some of the strides the company has made toward marketing its product, some analysts have cited its recent convertible share buyback as a positive development. In early December, Crocs' stock surged when the company said it planned to buy back half of the preferred convertible shares the private-equity firm Blackstone acquired in a $200 million investment in 2014.
To be sure, the company has appeared to be in "comeback" mode for years. In mid-2014, Crocs said it planned to shutter stores and lay off employees amid waning clog demand, Business Insider reported at the time. The company has also shuttered stores over the years, shrinking from 585 stores in 2014 to 382 in 2018.
Some experts following the stock are wary the company's turnaround will truly take hold. After Crocs' presentation at an investment conference last week in Orlando, where the company raised its fourth-quarter and 2018 revenue guidance, some analysts maintained their "neutral" and "hold" ratings on the stock.
"While we believe the structural changes in place enhance sustainability, we also hesitate to chase the stock at current levels," Baird analysts led by Jonathan Komp told clients last week.
"We are more optimistic about the pipeline of initiatives into 2019, though we wait for pullbacks or signs that revenue over-delivery can continue before becoming more constructive following the sharp run up."
Shareholders will receive a more complete picture of how Crocs fared in the fourth quarter - which proved to be a historically dismal period for the financial markets - when the company reports earnings next month.
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