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Crocs' ugly shoes score a pretty payday
They're the hottest thing to hit the streets this season, but will the company still be standing after the fad fades?
By Jessica Seid, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Crocs, the colorful resin clogs, are the biggest footwear fad since Ugg boots, and equally as ugly. But will they be able to sustain the same long-term success that Uggs' homely sheepskin designs have enjoyed?

Crocs Inc. (Charts) started just four years ago when three Boulder, Colo.-based founders decided to market a shoe developed and manufactured by Foam Creations, Inc.


The chunky shoes, which cost about $30 a pair, are made with a proprietary resin which softens as it warms, and molds to the wearer's foot - making them surprisingly comfortable.

The shoes, which were originally intended for boating because of their slip-resistant soles, have ventilation holes near the toes and are odor resistant, another big plus.

In addition to being well-suited for nurses, food servers, bartenders and cooks, the clogs have become increasingly popular with both kids and adults across the country. Lately, even celebrities like Terri Hatcher and Jack Nicholson have been photographed in their Crocs.

Crocs, which debuted as a public company on Feb. 13 in an offering that raised $207.9 million, said last week that its second-quarter profit surged thanks to strong demand domestically and abroad.

Income grew to $15.7 million, or 39 cents per share, up from $3.3 million, or 10 cents per share in the period a year before.

Those results widely beat Wall Street's expectations of a 22 cents per share profit, and Crocs also set its third-quarter guidance above the Street's projections.

"Our second quarter results were much stronger than we anticipated due to increased demand for our footwear both domestically and overseas," President and Chief Executive Ron Snyder said in a statement.

The stock rallied immediately after the earnings report, to trade near $32 on the electronic brokerage network Inet.

But, more recently, the stock moved down nearly 6 percent in active trading on Monday and down another 3 percent on Tuesday on the news that Croc has a secondary stock offering of more than 7 million shares scheduled to price on Aug. 16

Shares closed Tuesday at $25.40, down about 7 percent since the stock's closing price on the first day of trading.

A flash in the pan or a future for Crocs?

"Clearly the way the stock reacted in the wake of their stellar quarter, people think this is a fad that's not going to last, but they're just getting started," said Lori Wachs, a fund manager at Delaware Investments.

And Wachs, among others, points to Uggs as the ultimate example. Uggs maker Deckers Outdoor Corp (Charts) proved that its boots could withstand the fleeting fancy of teenagers, with sales that are still going strong after several years, despite outgrowing their of-the-moment appeal.

Crocs is doing everything it can to make sure it stays in the game as well.

The company is actively fueling growth with new styles and distribution deals, like its recent deal with Walt Disney Co. (Charts) to introduce a limited edition line of footwear featuring Disney characters.

But even the most loyal Croc wearers agree that the shoes are really ugly, leading some to wonder if it's only a matter of time before the masses realize that the emperor has no clothes - or at least no taste.

However, even if the fad does fade among kids and teens, as most do, there's still a high probability that Baby Boomers and professionals will keep shuffling in their shoes thanks to their extreme comfort and durability.

Hey, if Uggs can do it, why can't Crocs? Top of page

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