Successful Brand or Victim of Cheap Imitations?

Tag : crocs shoes

There's a debate raging as to whether Crocs ( CROX ), maker of the famous Croslite clog, is a dead fad or a value atits current stock price just over $7. The stock is down from $75last Halloween, but the business sports an operating margin of 23%,revenue growth of 40%, insider ownership of 11%, and an impressiveline of footwear beyond the original clog -- it even includeswomen's shoes with heels. Look at all the styles at the Crocs website .

Here at The Kelly Letter , I began building a position in Crocs last month to howls ofprotest from some and cheers of encouragement from others. Thoseprotesting said the original Crocs clog was a fad killed by cheapimitations. Those cheering said the original clog itself was no fadbecause it's very comfortable and, furthermore, the expanded lineof styles speaks to the company's long-term plans and prospects.

I decided to start buying shares because it looks like Crocs ismaking strides towards establishing its name as a desirable brand.There will always be knock-offs, but are they as good as theoriginal?

Where I live and work in Japan, the knock-offs have shown up fromChina but they feel different. People who've gone on comparisonshopping trips for me reported that true Crocs are softer both interms of pushing down on them with one's feet and in terms ofrubbing their surface with one's fingertips. The Croslite materialis better.

Also, teachers and mothers at schools near my office report thatmothers do not want their children seen in knock-offs. They buy forthem either real Crocs or an entirely different kind of shoe, not an imitation. That's branding at work.

These are anecdotal observations, but they're useful. I'd like toknow the word on the street from other parts of the world as well.If you have access to a shopping area and can compare Crocs withimitations that are available, please send in your impression. I'dalso like to hear what people say in your neighborhood. Is therevalue in the Crocs brand, or is it just a maker of a fad shoethat's now been flanked by knock-offs?

Disclosure: long.