- Playing For Doubles
- Posts
- Crocs ($CROX)
If you like this article, please share it with a friend :)
If you’re new here, I share “buy-and-hold portfolios” that I think can double in 3-5 years. My investment philosophy is simple: Try to find the best stocks I can and let them sit for years. Incur no costs with such a portfolio, and it is simple to manage.
$CROX ( ▲ 2.01% ) the maker of the “ugly” foam clogs, trades at:
Roughly:
4.5 Billion market cap
7x earnings with >30% ROIC
20% free cash flow yield
The company has also authorized ~$1.3 Billion in share buybacks. That’s >25% of the entire company market cap.
That’s cheap!
Frankly, I kind of like how Crocs look, not sure why people think they’re ugly?
In any case, Mr. Market has put on sale a pretty good business, one that generated over $1 Billion in operating income over the past 12 months.
But everyone’s running for the hills screaming “fad!” and “consumer discretionary!”
Here’s why that’s a mistake.
1. Crocs Is a Maverick
As I’ve written before, in business, every industry does things a certain way. These “industry conventions” are determined by the leaders of that industry.
For small innovative companies to prosper, they must change the game entirely and create new ways of doing things. Otherwise they’ll remain mediocre at best.
Companies who approach their industries in a completely new way are what I call Mavericks.
Crocs is a Maverick. It is clearly defying conventional wisdom when it comes to the shoe industry.
Here are a few ways how:
Crocs are made as a single, molded piece.
This simplifies manufacturing processes and supply chains
This also means their shoes are less expensive to make compared to industry.
This helps gross margins.
Crocs have ventilation built directly into their shoes.
This makes Crocs stand out, but also reduces materials costs.
Crocs lets you customize your shoes. Where else can you do that? This leads to many non-obvious benefits:
Infinite design permutations/selection: No 2 shoes are the same.
Jibbitz + clogs = walking advertisements (literally).
High margin upsells. Sometimes customers spend as much on the Jibbitz as they do on the shoes.
Jibbitz are a monetization opportunity even if a customer isn’t in the market for new shoes.
Jibbitz improve customer loyalty since they provide a form of self expression, meaning shoe wearers have a deeper relationship with the product and the Crocs brand.
Jibbitz can also be great gifts. This expands both the market of buyers, and the purchase frequency.
Crocs does Influencer Marketing Right:
Lets them leverage high margin digital DTC channels effectively.
Just ask Nike, this isn’t easy.
And this also helps them enter new markets faster, and with a lower cost structure.
No need to build out physical stores (or at least not as many).
Crocs is able to sell not only the affordable $45-$60 shoe, but has also demonstrated the ability to successfully drop limited edition footwear in collaboration with celebrities and other brands. These shoes can cost several hundred dollars a piece!
Crocs may seem like just another shoe brand, but it is a complex and unique company approaching its market in many novel ways.
2. Crocs is a 20-Year “Fad” That Won’t Die
Let me address the elephant (or should I say crocodile?) in the room.
People have been calling Crocs a fad for 20+ years.
It’s simply not.
What Makes Something a Fad?
1. Rapid Unsustainable Growth: Explosive adoption driven by novelty or social contagion rather than genuine utility. Think Beanie Babies.
2. Short Lifespan: Peak popularity followed by rapid decline. The product becomes culturally “over” and consumers move on to the next thing.
3. No Repurchase Behavior: Once you own it, you’re done. Nobody buys a second Pet Rock or a new Furby every year.
4. Lack of Functional Advantage: The appeal is primarily novelty or social signaling rather than solving a real problem better than alternatives.
5. Weak When Fashion Cycle Turns: Once the “coolness” factor fades, there’s no underlying demand floor.
Why Crocs ISN’T a Fad
1. 20-Year Track Record: No fad lasts two decades. Even accounting for the near-death experiences in 2008 and 2014-2016, the brand survived and returned to growth. Fads don’t do that, they die and stay dead.
2. Strong Repurchase Behavior: People buy multiple pairs of Crocs. They buy them in different colors. They buy them for different occasions (garden Crocs, work Crocs, going-out Crocs). This is consumable/wardrobe behavior, not fad behavior.
3. 900 Million Pairs Sold: That’s not a fad, that’s market penetration. Many of those customers come back for replacements, additional pairs, or Jibbitz.
4. Genuine Functional Superiority
Crocs solve real problems:
Comfort (especially for people on their feet all day)
Durability (they last years, even with heavy use)
Easy to clean (critical for healthcare, food service, not to mention for parents!)
Affordable ($45-60 vs. $100+ for quality alternatives)
Waterproof/versatile (actually work as boat shoes, garden shoes, etc.)
Healthcare workers don’t wear Crocs because they’re trendy. They wear them because after a 12-hour shift, their feet don’t hurt.
5. Multiple Cohorts of Adoption
Original adopters (2000s): Still buying
Gen Z: Discovering Crocs fresh through TikTok and pop culture
Healthcare workers: Steady, utilitarian demand
Parents: Buying for kids (who destroy shoes quickly, creating repurchase cycles)
Fads don’t successfully recruit new demographic cohorts 20 years in. They exhaust their addressable market and die.
3. Crocs Management Team
Spreadsheets don’t build businesses, people do.
The following 3 people are vital to the company.
Andrew Rees
When Andrew Rees took over as CEO in 2017, Crocs was a mess.
Some History:
The company has had two self-inflicted near-death experiences in its history.
Both times it came down to the same issue: lack of brand discipline.
Each time too much distribution led to the same problems: discounting, margin pressure, and brand deterioration.
Rees changed that.
He cut significant costs.
Slashed store count.
Controlled distribution, shifting sales to digital and DTC owned channels, while tightening wholesale allocations.
He rationalized SKUs.
And developed a repeatable playbook for partnering with influencers to create brand desire and credibility, and to drive sales.
Steven Smith
In November 2024, Crocs made a hire that flew under the radar but could be one of the most important moves in the company’s history.
Steven Smith became Head of Creative Innovation.
If you don’t know who Steven Smith is, here’s the short version: he’s a shoe god:
He is the guy behind the era-defining Yeezy franchise.
The designer of the New Balance 550s.
Reebok Pumps.
Fila Grant Hills.
He’s been involved with many iconic sneakers from the past 20+ years.
And his new Crocs designs are coming, and already generating buzz: [Link]
Terrence Reilly
Terrence rejoined Crocs in April 2024, and has been their Executive Vice President and Chief Brand Officer since May 2025.
“Terence has been heralded as the executive who turned Crocs from grandpa shoes into a hip streetwear staple, and the Stanley Quencher from just another utilitarian drinking cup into a must-have accessory for the TikTok crowd.”
-Wall Street Journal
He knows Marketing.
Will he have the same success popularizing the Heydude brand?
A 3-pete perhaps?
It could happen.
4. Crocs Benefits From A Structural Tailwind Nobody’s Talking About
Here’s something that doesn’t get enough attention: the world is permanently more casual than it used to be.
10-15 years ago, wearing plastic clogs to most offices would have been career suicide. Today, it’s normal.
Athleisure has gone from “weekend wear” to “acceptable everywhere.”
When was the last time you saw a guy with a tie on TikTok? “Creators” dress casual.
Casualization (is that a word?) isn’t a trend, it’s a structural shift.
And Crocs is perfectly positioned to benefit.
Add to that, Crocs are affordable ($45-60 for most styles), comfortable, and durable, and you have a product that works even in tougher economic times.
While people might skip the $600 handbag, a $50 pair of comfortable, durable shoes that lets them express their personality through Jibbitz customization is still attainable.
Valuation & Potential
Let’s talk numbers.
4.5 Billion market cap
7x earnings with >30% ROIC
20% free cash flow yield
By any measure the valuation is cheap.
The only way it isn’t is if the brand suddenly collapses, and the business sees a massive deceleration in revenue, margins, and free cash flow.
At current prices, the market is skeptical the company will continue to be successful, and a lot of bad things that “could happen” are baked into the price.
Remember, there are three sources of return for any stock:
Change in Shares Outstanding
Multiple Expansion
Earnings Growth
Share buybacks are in the company’s DNA: Crocs has reduced its share count by ~40% over the past decade. More recently, by ~20% over the past ~5 years.
This is despite paying down ~$1B in debt the past few years.
Deleveraging the balance sheet is happening quickly, and soon, once the company reaches its target debt levels, excess cashflow will be directed towards even more share buybacks.
The company has authorized ~$1.3 Billion in share buybacks, >25% of the entire company market cap.
At today’s prices, every dollar spent on buybacks is very accretive.
If the company can successfully buy back say 25% of shares outstanding, the shares would be worth 33% more on a per-share earnings basis.
That by itself provides a 7% CAGR (if done in 4 years), or 6% CAGR (if done in 5 years).
Multiple Expansion:
Typically, multiples expand when earnings are predictable/less volatile, recurring (repeat purchases), and margin-rich.
One can argue Crocs is already exhibiting these characteristics.
But the market is skeptical about durability.
The longer Crocs remains a stable business, the more likely the market finally accepts that Crocs are not a fad.
If the earnings multiple just goes from 7x to a modest 10x earnings, that’s a 9% CAGR over 4 years.
Earnings Growth:
The Street has $CROX ( ▲ 2.01% ) earning about half its market cap in just 3 years! (EBIT)
At that pace, we don’t even need earnings growth for this investment to work out well.
Even without any earnings growth, the above two sources of return (share count reduction and multiple expansion) add up to 16% CAGR (a double in less than 5 years).
But here is where things could get really interesting. The company has exposure to several sources of optionality:
International Acceleration:
Crocs is a Global company
International sales grew 16% in Q2 2025, now representing more than half of company revenue
China was up >30% y/y.
In China, Crocs has done a great job finding product and marketing fit with the customer segment they call explorers “young, urban consumers, especially women, who value creative expression, comfort, and bold, fashion-forward styles compared to the basic clogs popular in the U.S.”
India is already seeing double-digit growth despite only starting their influencer / brand ambassador playbook there. They have just 1 ambassador right now.
Other tier 1 markets like South Korea and Japan are also just getting started.
Sydney Sweeney:
We’ve seen the commercial and social impact Sweeney has had on American Eagle.
Sweeney is clearly in the cultural spotlight right now, and Crocs has jumped all over this, using Sweeney as Heydude’s brand ambassador.
Product Extensions:
Crocs Sandals are doing well.
Over time, the company has the potential to carefully extend and emphasize other product lines like totes, purses or backpacks. Of course, they will need to be careful not to dilute their brand.
Jibbitz Charms:
Remember those little rubber charms you plug into the holes of your Crocs? They’re called Jibbitz Charms.
They’re priced between $3-25, and they have extremely high margins.
Only ~8% of revenue currently comes from Jibbitz. I think that can be substantially higher.
These are not a novelty, but instead are a unique, low-cost and high margin, self-expression and personalization platform, which might just become bigger than most people think.
In some ways, Jibbitz allows people to build their very own “real world” avatar. This aligns perfectly with Gen Z’s obsession with customization and self-expression. Whether you’re into Disney, music, or your local sports team, there’s a Jibbitz for you to broadcast that to the world.
Sometimes customers pay as much for the charms as they do for the shoes themselves.
Not only do Jibbitz allow customers to customize their shoes, but they could easily be used to customize any future product extensions as well.
And it is my understanding this platform was purchased for only $10-20m, what a great acquisition?!
As always, there are risks:
Fashion turns and the costs of tariffs are unpredictable.
But,
There is a lot of margin of safety built into the price.
We’re not paying much for a really good business that is well managed and one that operates conservatively.
And we’re getting a ton of optionality not accounted for in the price.
Lastly, if it’s good enough for Norbert Lou, it’s good enough for me.
For those that don’t know Lou, he runs Punchcard Capital, is a very selective super-investor. He wrote the famous NVR stock pitch we reviewed here.
In Conclusion
Could I be wrong about Crocs? Of course.
Maybe the brand does collapse.
Maybe International doesn’t pan out.
Maybe Heydude never recovers.
But at 7x earnings with a 20% FCF yield and massive share buybacks, at these levels, I just need to not be catastrophically wrong.
And given the 20-year track record, the focus on brand management, personalization and internationalization, the multiple sources of optionality, Andrew Rees’, Steven Smith’s and Terrence Reilly’s creative leadership, and the structural tailwind of casualization, I like my odds.
Sometimes the best investments are the ones everyone else is running away from. The ones that seem too obvious or too simple or too “ugly” to work.
Crocs might be the ugliest shoe on the market (according to some).
But at these prices, I think it’s a beautiful investment opportunity.
In Coffee Can 16, I’m long the stock and the Jan 15 2027 $90 Calls.
If you’d like to receive my Coffee Can buy/sell alerts, join the Playing For Doubles Alerts Waitlist.
If you enjoyed this article, please share it with a friend. Thanks :)
Disclaimer: This is not investment advice.