Case 43 — Crocs · Andrew Rees · 2021

You have a record year, a single product, and a memory of 2008. Do you spend $2.5 billion on a second brand to make the company less dependent on the clog?

It is December 2021 and you have just had the best year in the company's history: revenue up about two-thirds to $2.3 billion, operating margin around 30%, a share price near its all-time high. Thirteen years ago the same company lost $185 million and its stock fell to a dollar, because the clog had gone out of fashion. You have one product, and everyone including you knows what happens to one-product footwear companies when the cycle turns. A canvas slip-on brand called HEYDUDE, founded in Italy and now mostly American, is available. It has around $570 million of revenue, is growing fast, and sells a cheap, comfortable shoe to a customer who is not yours. The price is $2.5 billion — about $2 billion in cash, funded with debt, and the rest in stock.

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