A search is underway for a new CEO at Crocs following an investment by private equity firm Blackstone and ongoing sales and profitability challenges which could see the funky footwear maker open fewer stores.
Crocs said John McCarvel planned to retire from his position as Croc’s president, CEO and board member around April 30, 2014 as the company rethinks its approach to growth with increased input from Blackstone representatives who will occupy two board seats.
"As we look forward, 2014 will be a significant transition period for the company,” said Crocs chairman Thomas Smach. “We will recruit a new CEO who will work with the reconstituted board to refine our short-term and long-term strategic plans, which will include a sharper focus on earnings growth with less emphasis on top-line growth. We will focus on improving financial performance, particularly in the Americas and Japan, as well as enhancing our global retail execution.”
The emphasis on profitable growth and retail excellence may result in the company moderating the pace of investments in new retail stores, according to Smach, who noted the company is focused on creating long-term value for shareholders.
“Over time, we intend to further elevate our brand positioning by enhancing our consumer-driven marketing and distribution strategies and capabilities,” Smach said.
The revised strategy and change in senior leadership follows a $200 million investment by Blackstone that in addition to two board seats bought the company newly issued preferred stock that pays a 6% dividend rate and the potentially lucrative option of being converted into common stock at $14.50 a share.
"Blackstone sees tremendous opportunity in the Crocs brand and global franchise. The company has the infrastructure and products to enable continued growth across the wide range of geographies and channels through which it operates,” said Prakash Melwani, senior managing director and chief investment officer of Blackstone's Private Equity Group.
In conjunction with news of Blackstone’s stake and the departure of CEO McCarvel, Crocs also reduced its fourth quarter outlook and said restructuring charges are likely in 2014. The company expects revenues to be at the low end of a previously provided guidance range of $220 million and $225 million and that its loss would be closer to the low end of a range of 20 cents to 23 cents a share.
The reduced outlook for sales and profits follows disappointing results for the third quarter in which sales declined to $288.5 million from $295.6 million and profits tumbled to $13 million, or 15 cents a share, from $45.1 million, or 49 cents a share.
Outgoing Crocs CEO McCarvel spent 10 years at the 12 year old, once high flying company, including the past three in the top job.
"We've made tremendous progress as a company over these past 10 years – from a one-season, one-shoe, and one-country brand to a diversified, four-season global footwear leader that is on solid financial footing,” McCarvel said. “The investment by Blackstone is a vote of confidence in our company and our brand, and Crocs will benefit from Blackstone's financial, consumer, retail and brand experience and relationships."