Download - Crocs 2015 Investor Day Presentation

1Crocs Investor DaySeptember 30, 2015

Boston, MA

2Some information provided in this document will be forward-looking, and accordingly, are subject to the Safe Harbor provisions of the federal securities law. These statements include, but are not limited to, statements regarding future revenue and earnings, prospects and product pipeline. We caution you that these statements are subject to a number of risks and uncertainties described in the Risk Factors section on the Company's 2014 report on Form 10-K, filed on March 2, 2015 with the Securities and Exchange Commission. Accordingly, all actual results could differ materially from those described in this presentation. Those viewing this presentation are advised to refer to Crocs' Annual Report on Form 10-K, as well as other documents filed with the SEC for the additional discussions of these risk factors. Crocs is not obligated to update these forward-looking statements to reflect the impact on future events. The Company may refer to certain non-GAAP metrics in this presentation. Explanation of these metrics can be found in the footnotes of this presentation.

Forward Looking Statements

3 Revenue range $270 - $280M

This includes an estimated $4M currency erosion within the quarter

Additionally, expect approximately $6M of shipment holds in China

Q3 Guidance Update

4Objectives for Today

1. Provide an overview of the Company

2. Share our strategy, our initiatives and our progress to date

3. Convey confidence in our expectations for the future

1

2

3

5Crocs Leadership Team Members Presenting Today

Gregg Ribatt, CEO

Andrew Rees, President

Michelle Poole, SVP Global Product Creation & Merchandising

Terence Reilly, SVP Chief Marketing Officer

Mike Smith, SVP Finance (Interim CFO)

6Agenda

Topic Speaker

Continental Breakfast

Overview Gregg Ribatt, CEO

Crocs Strategy Andrew Rees, President

Product Overview Michelle Poole, SVP Global Product Creation & Merchandising

Break

Marketing Overview Terence Reilly, SVP Chief Marketing Officer

Financial Plans Mike Smith, SVP Finance (Interim CFO)

Recap Gregg Ribatt, CEO

Q&A Crocs Team

Lunch

7OverviewGregg Ribatt, CEO

8Crocs evolution entering 5th distinct phase since inception in 2002

Crocs Annual

Revenue($)

Introduction High growth Cost cuttingDoor growth / international

expansion

Strategic repositioning for sustainable growth

1 432 5

Crocs today is one of the 10 largest non-athletic footwear brands in the world

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1,200M

900M

600M

300M

0

9Crocs Is a Democratic Brand With a Broad Consumer Base

One of the 10 largest non-athletic footwear brands in the world

$1B+ annual sales across 90+ countries

Sold more than 55 M pairs last year

Appeals to the whole family

Consumers say Crocs are family oriented

61% of people who own Crocs have kids and 68% are married

Resonates around the world with high brand awareness

High brand awareness in key strategic markets: 76% in the U.S., 73% in the UK, 51% in Germany, 44% in China & Korea, and 68% in Japan

Reaches across broad socioeconomic groups from moderate to high income

Crocs appeals across all income brackets, especially to the large global middle class

10

A Unique Brand With Significant Growth Runway

Strong and growing Crocs ownership in casual footwear market Large considerer group with sizeable short-term growth opportunity Huge neutral group that represents significant mid-to-long term growth potential

Rejecters: stated they are not interested in purchasing Crocs brand

Owners / Considerers : ~1/3 of population either already owns or is considering purchasing Crocs in the next year

Neutrals: havent purchased Crocs in past two years, arent considering purchasing in next 12 months but dont reject Crocs brand

12% 18% 51% 19%

Neutrals RejectorsConsiderersOwners

Huge growth opportunity

Brand Strength Monitor: Conducted in US, UK, DE, CN, JP & KR 9,000 participants fielded in June 2015 General market study aligned to census

11

Opportunities to Evolve the Business Model

Focus on profitable growth over door expansion

Centralize critical functions

Add talent with industry experience in key functional areas

Focus on sustainable growth and sell-thru

SKU rationalization and globally consistent product range

Compelling product stories supported by powerful marketing

Optimize retail portfolio

Leverage partners in sub-scale international markets

Consistent global brand identity

Elimination of duplicative cost structures

Best-in-class, standard operating procedures

Invest in and leverage talent globally

Executive leadership

Product and Merchandising

Sourcing

12

Strategic Repositioning: 3 Phases

Strategy Formulation Transformation Growth Platform

Phase 1 Phase 2 Phase 3

2014 2014/2015 2016 & Beyond

Deep diagnostic

Strategy development

Team enhancements

Phased restructuring

Product repositioning

Integrated marketing

Supply chain redesign

Growth realization

Focus on 6 major markets

Support from best-in-class partners

13

Crocs Strategic Priorities

Developing powerful product stories supported with effective marketing

Driving global cohesive brand positioning

Increasing working marketing spend

Enhancing engagement with key wholesale accounts

Gaining greater strategic and economic leverage from our direct-to-consumer assets

Prioritizing investment in larger-scale geographies

Streamlining the cost structure by reducing duplication and complexity across regional offices and the corporate center

Investing to drive Supply Chain effectiveness and reliability

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2

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The team will cover our efforts in greater detail over the course of the morning

14

Since June 2014, we have added significant experience in senior leadership across the organization

Name Title Experience

Gregg Ribatt CEO 20+ years

Andrew Rees President 20+ years

Michelle Poole SVP Global Product Creation & Merchandising 20+ years

Bob Munroe SVP GM Americas 30+ years

David Thomson SVP GM Asia 25+ years

Mike Smith SVP Finance (Interim CFO) 25+ years

Phil Blake SVP Sourcing 20+ years

Donna Flood SVP CIO 20+ years

BENNETT

BENNETT

15

Despite global headwinds, we are beginning to see the results of our efforts

* Constant currency basis

Global Headwinds Results

Strength of U.S. dollar

Operational challenges

Challenges in China

Modest core business growth* in Q2 (excluding closed stores and exited product lines)

DTC comp up 4% in the Americas in Q2 (vs -4% in Q1) and up 6% in EU in Q2 (vs +2% in Q1)

E-Commerce revenues up almost 30% globally* reflecting the benefit of marketing investment and operational improvements

16

8+%Annual sales

growth

Low 50sGM%

Low 40sSG&A%

10-12%EBIT

margins

Deliver Top Quartile Industry Performance

Mid-Term Potential of Crocs

17

StrategyAndrew Rees, President

18

Crocs Strategic Priorities

Developing powerful product stories supported with effective marketing








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2

3

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8

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Overall Merchandising Strategies for Success

Consistent Global Product Strategy

Re-energize core molded footwear

Develop key casual platforms

Embrace the trends

Extend the Spring-Summer season

Effective SKU & lifecycle management

Consistent comfort delivery and storytelling

1

20

SS16 showing meaningful improvement based on improved product and extended season

Early customer orders support our expectation of high single digits wholesale growth consistent with qualitative feedback from key partners

Fastest wholesale growth coming from Americas and Asia

Encouraging Signs Based on Current SS16 Orders

Expected Full Season Wholesale Growth*

Americas Low double digits

Europe Flat to low single digits

Asia Low double digits

Total High single digits

1

* Assumes constant currency

21

Marketing Campaign Objectives

Reignite Excitement & Relevance For Crocs

Owners who purchased in past

6 months

Past owners considering

purchase

General population who have stated Crocs consideration or

are neutral

Associate our iconic clog to Crocs brand

Give Consumers Permission To Engage

Establish Crocs As A Modern Meaningful Icon

2

22



54%50%


6 months


purchase

67%


are neutral

68%




+11%+8% +3% +11%

2014*

2015**

2

Brand Strength Monitor Conducted in US, UK, DE, CN, JP & KR 9,000 participants fielded in June 2015 General market study aligned to census

* 2014 basis** YOY ppt. changes

23

+20%

Global Marketing Spend 2014 vs. 2015

20152014 2014 2015

Global Marketing Spend

~4% of sales

~6% of sales

3

+50%

Working Global Marketing Spend

24

Ad Engagement Impact

Brand Desirability

BrandPurchase Consideration

Consumers who recalled Crocs advertisementsvs.

Consumers who havent seen Crocs advertisements

+27%+28%

3

Recall Crocs advertisement in past 6 months Absolute difference of consumer advertising recall versus non-aware

25

Enhanced Wholesale Engagement Model

Top to Top Strategic

Engagement

Real Prelines

Sell thru & Profitability

Sell In with Marketing

Support

Best in Class Delivery &

Service

Area of FocusEuropeU.S.

4

26

Drive Real Clarity on Channel Roles

Wholesale Retail E-Commerce Distributors

Main driver of future sales growth

Reach consumers in multi-brand environments

Leverage retail expertise of key partners

Showcase the Crocs Brand

Interact directly with and learn from consumers

Promote the breadth of our product in high-traffic, highly visible locations

Focus on outlet for growth

Fastest growing channel

Preeminent flagship DTC environment

Educate consumers about the product and the brand

Provide access to the full line

Drive distribution in key markets where:

Crocs lacks resources

Critical expertise is required

Understanding of market risks is crucial

Pathway for Growth

Drive economic leverage and brand engagement

Leverage best in class partners

5

27

Significant Accomplishments in DTC

Restructured fleet and e-commerce platform

Adam Michaels - Global E-Commerce Leader

Claire Conley Americas Retail Leader

Neil Parker Asia Retail and Global Franchise LeaderBrought in talent to lead key functions

Enhanced assortment strategies and brand story telling

Replenishment and in stocks

Consumer experience and service

Portfolio pruning

Focused on the nuts and bolts of an effective DTC business

Narrowed web site portfolio to grow scale and increase profitability

Invest in improved web capabilities and enhanced story telling

Targeted each region with 20% outlet penetration to keep inventories fresh

Anticipated growth in E-Commerce & Outlet

Closed 148 stores over the last 18 months

Closed 9 e-commerce websites

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28

International Strategy

Crocs distributed in over 90 countries worldwide concentrated on 6 key countries for direct business

Americas APAC Europe

United States

China

Korea

Japan

United Kingdom

Germany

Best in class partners in rest of world

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Significant challenges in China over the past 12 months

Fragmented distributor base with more than 40 partners, many of which are small with limited financial strength

Consumer demand and sales began to slow in 2014 after a 3 year period of rapid expansion

Distributor order patterns assumed continued market expansion

In 2015, we moderated sell-in during the first half to assist partners with sell thru and reduce inventories in the channel

Recent China market pressures have slowed the pace of turnaround

Despite these pressures, e-commerce continues to experience strong growth of over 20%

Addressing issues with partners to evolve to a more sustainable business model in the near-term

China challenges Recent developments

We continue to have confidence in the mid-term growth potential of China

6

30

Overview of Operations Improvements/Cost Initiatives

$11M

$15M

0

10

20

30

40

50

TotalInternationalCorporate / AmericasStore closures

SG&A Annualized Reductions$Millions U.S. Dollar

~$43M

Note: Offsetting $15-20M in certain additional variable expenses, including marketing and variable compensation, anticipated in 2016

7

$17M

31

Investing in Supply Chain Effectiveness and Reliability

Invest to improve process reliability

Elevate organizational capabilities

Better defined planning roles & responsibilities

Drive strategic advantage from direct manufacturing

Simplify and reduce costs

40% reduction in Global SKUs (SS16 vs. SS15)

Dramatic reduction in direct shipments

Stabilize and reduce lead times

Improved customer and consumer

satisfaction

+

8

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Significant progress to date

Developing powerful product storiessupported with effective marketing




SKU count for SS16 reduced by 40% vs. SS15

Encouraging signs from SS16 wholesale orders

2016 sell in accompanied by coherent marketing support

Centralized global marketing function

Integrated, # Find Your Fun campaign launched in 2015

Brand consideration up by 27%

Increased working media by 50% in 2015

~$15M of incremental marketing spend

Campaign awareness increased by 11%

Top-to-top meetings with 10 of the largest global accounts

Pre-lining process implemented with 20 of the largest global accounts

Key accounts are supporting Crocs despite 2015 service levels

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4

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Significant progress to date





Closed 148 stores over the last 18 months

Opened selective stores, primarily outlets

Have hired significant new talent to lead DTC

Focus regional and management on 6 core markets

Leveraging best in class distributors in other market

Distributor upgrades in several markets (Indonesia, Philippines etc.)

Centralized core corporate functions

Reduced global salaried headcount by 20% over the last 18 months

Annualized reduction of SG&A by >$40M

Hired dedicated supply chain leadership

Implemented SAP ERP globally

Simplifying the path to market for improved reliability

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Product OverviewMichelle Poole, SVP Global Product Creation & Merchandising

35

Inconsistent Global Product Strategy

Lack of focus on molded product & core icon

Low awareness of global trends

Poor SKU management & heavy SKU proliferation

Lack of strong global product stories / launches

36

Overall Merchandising Strategies for Success


Re-energize core molded footwear

Develop key casual platforms

Embrace the trends

Extend the Spring-Summer season

Effective SKU & lifecycle management

Consistent comfort delivery and storytelling

1

2

3

4

5

6

7

37


Our customers expect our products to have certain key attributes that are consistent globally

Colorful

Relaxed

Comfortable

Distinctive

Fun

Maximize our globally-common product assortments with consistent Crocs DNA

1

38

Build Out Core2

39

Develop Key Casual Platforms3

40

Elevate Style

Global Markets

Seoul

Los Angeles

London

Tokyo

New York

Paris

Miami

Berlin

Shanghai

Trend Agency Trade Shows &

Publications

4

41

Extend our Spring-Summer Season to 8 months

12/1 & 1/1

Delivery 1

Where to Play

Core refreshTransition items &Spring

Spring into Summer items

High Summer &

Early transition items

2/1 & 3/1

Delivery 2

4/1

Delivery 3

5/1, 6/1 & 7/1

Delivery 4

Historical Spring Season

New Spring season

5

42

Effective SKU Management

How do we do more with less?

Americas

EuropeAPAC

SS15 SS16

Americas

EuropeAPAC

2,000 SKUs at GTM;1,296 in production

28% Global SKU Alignment

1,150 SKUs (with extra 2 months of deliveries)-40% vs SS15 GTM

65% Global SKU Alignment

Achieving more disciplined LCM will allow us to focus on and drive growth with our new styles while gaining operational efficiencies

6

43

Significant Improvement in SKU Productivity

Key Benefits:

Focused story telling Globally-aligned key

collections

Planning and Forecast Accuracy

Fit and Quality Improvements

Lower tooling costs

6

Line management results in significant SKU productivity improvements

44

Comfort Storytelling7

45

Comfort Storytelling7

46

Product OverviewBuilding a product framework for success

47

Core Evolution

Classic clog Freesail clog

Kadee flat Sienna flat

Core EvolvedConsistent Crocs DNA

48

Franchise Development Citilane

Womens molded flat

Roka fully molded

Cut & sewlace up Cut & sew

twin gore

Fabric wrap clog

KidsCut & sewFlip

UnisexMolded clog

49

Franchise Development Swiftwater

Hybridsandal

Molded clog

Leather clog

Flip Casual moc

Casual hiker

Kids' clog

50

Product OverviewSS16 Seasonal Big Ideas

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Consumer Facing Seasonal Big Ideas

UNI

52

Womens & Girls Isabella Collection

Isabella Mini Wedge Isabella Flat Sandal

Isabella FlatIsabella Sandal

53

Womens Sienna Flat

Sienna Flat

Sienna Leopard Shiny Flat

54

Womens Wedges Leigh II and A-leigh II

A-leigh Crisscross Wedge

Leigh II 2-Strap Wedge

A-leigh Wedge

55

Womens & Girls Karin Clog

Girls Karin Clog

56

Unisex Citilane Collection

CitiLane Rka Slip On

CitiLane Clog

CitiLane Canvas Clog

CitiLane Flip

57

Mens & Kids' Swiftwater Collection

Swiftwater Flip

Swiftwater Leather Clog

Swiftwater Clog

Swiftwater Sandal

58

Summer Core Molded Flips

Kadee Flip

Classic Flip

59

Kids Bump It Collection

Bump It Clog

Bump It Sandal

Bump It Shoe

60

Kids Licensed Star Wars, Frozen & Finding Dory

SW Millenium Falcon Bump It Shoe

Frozen Fever Elsa Sandal

Finding Dory Lights Up Clog

61

Fall 2016

62

Rain

Casual / Active Shoes & Boots

Building a Year Round Business: Fall

Fun & Stylish

Functional Boots

Licensed

Core & Core Lined

Resort

Focused assortment & story telling

New luxe clog

Bliss boot leopardBump it boot

Kinsale chukka

Fun & StylishFunctional Boots

Licensed* Resort

*licensed covers all 4 categories

63

Product transformation is well underway

64

Marketing OverviewTerence Reilly, SVP Chief Marketing Officer

65

Crocs in The News

2015 Marketing Campaign

2016 Sneak Peek

Agenda

66

Marketing OverviewCrocs in The News

67

Crocs in the News

68

Crocs in the News

69

Crocs in the News

70

Marketing Overview2015 Marketing Campaign

71

Reignite Excitement & Relevance For

Crocs


54%

50%Owners who havent

purchased in past 6 months

Considerers who have owned Crocs but havent purchased

in over 2 years

67%General population who

have stated Crocs consideration or are neutral

68%Associate our iconic clog to Crocs brand


Establish Crocs As A Modern Meaningful

Icon

72

First. A Quiz.

78

Celebrate our icon.

79

At Crocs, we believe our clog is an iconic symbol for having fun.

We see the fun in almost anything and believe you can turn

anything you do into something fun. So lets celebrate the fun

we see in everything and encourage you to go find your fun.

Creating Fun = Selling Crocs

81

2015 Marketing Campaign

Crocs largest media campaign in brand history

Broad and impactful target consumer reach

Magnifying integration across TV, digital, OOH, social, store presentation

6.8BIMPRESSIONS!!!

Global Media Breakdown

40%

43%

16%

TV Digital OOH

82

Global Marketing Spend

South Korea

U.K.6%

Germany

China

Japan

U.S.

Spend by Country Percent

83

360 Degree Campaign

Strong connectivity across all touch points

DIGITAL OOH E-COMSOCIALBROADCAST STORE ENVIRONMENT

84

Compelling Creative

85

New York City

86

One Piccadilly, London

87

Beijing Guomao Station

88

Digital

89

Digital

89

90

Robust Channel Integration

91

Social Media

Iconic Clog Crocs Thoughts Style Features Seasonal Influencers

Fans of Fun Events, Holidays, Seasons Fun Facts Retail

92

Television

93

Spring Summer Television

94


95


96



54%50%


6 months


purchase

67%


are neutral

68%




+11%+8% +3% +11%

2014*

2015**

2

Brand Strength Monitor Conducted in US, UK, DE, CN, JP & KR 9,000 participants fielded in June 2015 General market study aligned to census

* 2014 basis** YOY ppt. changes

97

Ad Engagement Impact

Brand Desirability

BrandPurchase Consideration

Consumers who recalled Crocs advertisementsvs.

Consumers who havent seen Crocs advertisements

+27%+28% Recall Crocs advertisement in past 6 months Absolute difference of consumer advertising recall versus non-aware

98

Marketing Overview2016 Sneak Peak

99

2016 Campaign Evolution

LEVERAGE FUN TO CREATE A DEEPER EMOTIONAL INVESTMENT

1. CREATE AND FACILITATE FUN by inspiring and amplifying fun experiences

2. TELL 2016 PRODUCT STORIES and demonstrate how wearing Crocs shoes helps people find their

own fun

3. SUPPORT WHOLESALE PARTNERS through fun Crocs activations to drive additional traffic and sales

during key periods

Increase working marketing dollars in excess of 20% to achieve 2016 objectives

101

Financial PlansMike Smith, SVP Finance (Interim CFO)

102

Crocs Financials: Key Points

Crocs is going through a significant transition, not only in its organizational structure and leadership, but in its business model

We have been making this transition in the face of significant headwinds: currency, China, and operational challenges

We have accomplished much in the past 12 months towards this transition and are making meaningful progress

When complete, we are confident Crocs can return to a 10-12% EBIT business in the mid-term future

103

The Evolving Business and Financial Model

Sales

Annual Growth

Adj. GM%*

Adj. SG&A%*

Adj. EBIT%*

Stores

Comments

2011

$1.0B

27%

53.6%

40.5%

13.1%

430

Weak U.S. dollar results in high Gross Margins

Balanced wholesale and retail growth

2014

$1.2B

0.5%

50.5%

45.1%

5.4%

624 (peak)

Strong U.S. dollar drives down Gross Margins

Retail door growth drives SG&A increases

Mid-Term Model

8%+

Low 50s

Low 40s

1012%

~550

Product mix and supply chain offset strong dollar

SG&A lowered through completed restructuring, store closures and leveraging future sales growth

* Adjusted for restructuring, special and other non-recurring charges; Please refer to the companys 2014 10-k filed on March 7, 2015 and other filings for full reconciliation of GAAP to Adjusted financial results

104

Significant Challenges from US Dollar Exchange Rates

* Through June 30th

100%

102%

104%

106%

108%

110%

112%

114%

116%

2011 2012 2013 2014 2015

Crocs Basket of Currency vs. USDCurrencies having the greatest impact:

Currency2011-15 %

depreciation vs. USD

Japan 33%

EUR 19%

Russia 57%

Brazil R$ 60%

Korea 6%*

6%

14%

In 2014, approximately 35% of Revenue and 65% of costs were in U.S. dollars

105

Effects on Gross Margin from US Dollar Exchange Rates

Gross Margin % F/X rates depressed local purchasing power and impacted gross margins for the company

Total impact on gross margin from peak is about 400 basis points

Gross Margin constant currency in 2015 comparable with that of the peak

Assuming current currency rates, we anticipate gross margin to be in the low 50s in the mid-term

2011 2012 2013 2014 2015

At constant 2015 FX rates

As reported

106

Overview of Operations Improvements/Cost Initiatives

$11M

$15M

0

10

20

30

40

50

TotalInternationalCorporate / AmericasStore closures

SG&A Annualized Reductions$Millions U.S. Dollar

~$43M

Note: Offsetting $15-20M in certain additional variable expenses, including marketing and variable compensation, anticipated in 2016

$17M

107

To Realize Our Potential, We are Focused on

Near term Mid-term

Spring Summer 2016 deliveries

Wholesale growth driven by product, marketing, and operational improvements

Broad based growth in e-commerce

Enhanced retail execution

Cost control of SG&A expenses

8%+ revenue growth driven by Wholesale and e-commerce

Primary growth from Asia and Americas

Return China to sustained growth

Stabilized margin based on mix and COGS efficiencies to overcome currency and channel shift

Continued investment in marketing to support sales growth

Limit SG&A expense by leveraging existing talent and infrastructure

108

8% +Annually

Low 50s

Low 40s

10-12%

Mid-Term Potential2018+

Sales Growth*

GM %

SG&A %

EBIT %

Mid-Term Potential

*Organic growth at current exchange rates

109

Mid-Term Expectations Are Realistic

Constant currency core business growth in Q2 (excluding closed stores and exited product lines) up low single digits

Wholesale orders continue to support expectations of high single digit wholesale growth and are consistent with qualitative feedback from key retail partners

Improved consumer connectivity evidenced by e-commerce results and digital engagement

Enhanced product margin helping to offset currency headwinds

Annualized cost reductions are over $40M

110

SummaryGregg Ribatt, CEO

111

Crocs is in the midst of a significant turnaround with the goal of creating one of the worlds leading casual footwear brands

The initial priority was to strengthen the management team, ensure the smooth implementation of the SAP ERP system, and drive significant cost savings through simplification and focus

Concurrently, we have been focused on driving profitability and growth through elevating consumer connections including improved product and marketing execution

The full impact of our efforts will begin to be realized with the shipment and sell through of our Spring/ Summer 2016 linethe first developed by our new team

Nonetheless, we are beginning to see the early results of our efforts

Recap

112

8+%Annual sales

growth

Low 50sGM%

Low 40sSG&A%

10-12%EBIT

margins

Deliver Top Quartile Industry Performance

Mid-Term Potential of Crocs

113

Q&A

114

Thank you!

Download - Crocs 2015 Investor Day Presentation

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