Crocs to make its move: New home, new strategy have bottom line implications

NIWOT and BROOMFIELD — Crocs Inc. (Nasdaq: CROX), the Colorado-based creator of foam-like clogs and casual footwear, is targeting March 2020 as the move-in date for its relocation from Niwot to Broomfield.  Along with the address change, the company is changing the mix of how it does business to keep it running in the footwear industry.

After more than a decade in Niwot, Crocs is moving from its 98,000-square-foot headquarters at 7477 East Dry Creek Parkway to ATRIA Broomfield, a newly constructed two-building office campus that totals 176,586 square feet. Crocs will fill the 88,293  south building at 13699 Via Varra. 

In addition to changing location, Crocs is continuing to follow through with changing its sales channel mix by reducing the number of retail locations and increasing outlets as well as e-commerce and wholesale opportunities.

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The new Broomfield site will help the company meet the needs of its employees in addition to increasing collaboration and efficiency of space, according to Shannon Sisler, Crocs senior vice president and chief people officer.  She referred to the Broomfield site as a better option for the company to be able to attract and retain talent.

Sisler described the Northwest Corridor as a good location for employees to commute to from both Boulder and metro Denver.  The option of shopping at FlatIron Crossing Mall and utilizing nearby trails adds to the appeal.

The one-floor building design will allow for more employee collaboration as well as for adding more employees, she added.  “A large portion of our current building is being used for storage.  We’ll handle storage differently moving forward.”

Design for the interior building has just been firmed up with Denver-based Venture Architecture, according to Sisler.  Construction will start at the end of August, and expenses will be shared with the building owner, Etkin Johnson Real Estate Partners.  The lease has been negotiated with Etkin Johnson with an initial term of 10 years and two five-year renewal options. 

Sisler declined to provide budget figures for the construction and design project. She did, however, confirm that the decision to move to Broomfield was impacted by state of Colorado and city of Broomfield tax credit incentives.

The incentives include personal property rebates and are attached to creating new jobs over a 10-year term. 

In detail, the Broomfield City Council approved an agreement to provide a 50 percent rebate on the company’s personal property taxes. The value of the rebate over 10 years is $70,929. 

Additionally, the owner of the new Crocs headquarters location is expected to pay about $363,000 annually in ad valorem property taxes, according to Broomfield city documents.

The current number of Crocs staff in Niwot sits at about 380, and the anticipated staff number over the next 10 years is expected to reach up to 450.  “That’s over the life of the lease and depends on how business thrives,” Sisler said.

In line with Crocs’ focus on streamlining how it sells products, the company has been steadily reducing its stores. At the end of the first quarter of 2019, Crocs held 370 company-owned locations. Fifty-two percent of those are outlets, according to Sisler. 

At the end of 2018 the company held 383, and at the end of 2017 the number was 447.  “We’re continuing to right size our store fleet over the last year.  We’ve also shifted to all third party manufacturing, which is common in the footwear space,” she said.

“We’ll continue to increase e-tail distribution through partners.” Those online retailers currently include Amazon.com and Zappos.com. 

Wholesale growth continues to be a strategy for increasing profits, with a focus on building more business relationships with companies such as Dick’s Sporting Goods, DSW and Journeys, which are currently carrying Crocs.

Another piece of the restructuring strategy is that the Crocs North American distribution center in Ontario, California, is closing, and a distribution center in Dayton, Ohio, is expected to completely replace it by the end of 2019.  Reasons include geographical proximity for greater access to North American locations, which would improve delivery times to customers, according to Sisler. 

Modernization of automation capacity is another appeal of the new center.

Crocs expects that the automation will increase throughput by approximately 50 percent, according to its fourth quarter and full year 2018 results report.

According to the first quarter 2019 Crocs report, revenues were $295.9 million, growing 4.5 percent over the first quarter of 2018.  Wholesale revenues grew 5.2 percent, e-commerce revenues grew 16.5 percent, and retail comparable store sales grew 8.7 percent.