Consumer Products

As Crocs Closes Factories, Who Will Make Its Shoes?

Crocs Inc. (NASDAQ: CROX), the maker of odd, casual shoes, posted reasonable earnings. It also said it would shutter all of its manufacturing operations. What it did not say is where its products will be made in the future. It will have to outsource the business, but how, and why didn’t the company say? Maybe the reason is trade friction between the United States and other nations.

Crocs revenue rose 4.7% to $328 million. Second-quarter net revenue was $30.4 million, up from $18.1 million in the same quarter a year ago.

The company’s specific comments on it manufacturing business:

In connection with ongoing efforts to simplify the business and improve profitability, during the second quarter, the Company closed its manufacturing facility in Mexico and moved ahead with plans to close its last manufacturing facility, which is located in Italy. Related non-recurring charges are included in the Company’s second quarter SG&A results and the SG&A outlook.

If its new manufacturing plans are so important to profits, why not tell investors how the plan will work?

Crocs probably has no legal requirement to tell investors more. However, its silence is another example of how public corporations make important plans and shield the specifics of those plans from shareholders. In some cases, companies do not want competitors to know their plans, but where a manufacturer makes shoes does not give it an edge that will be mimicked by other shoe manufacturers. Crocs is too small to matter in the industry, and industry executives also certainly have explored the same ground to improve their own results

It may be that in the current political climate, Crocs wants to keep its plans confidential if they involve making all of its shoes outside the United States. At least in that case, its silence would be understandable, and a benefit to shareholders would not be undermined by trade friction.