I just tried these shoes on.

I'm in love.

I'm in love.

Comfort, nostalgic, kind of fun.

They're just heinous.

It's one of the most polarizing names in fashion.

Whether you love us or you hate us, you know who we are.

We are on an ongoing basis faced with skepticism from investors.

Crocs annual revenue was $1.2 billion back in 2014.

About a decade later, the brand is raking in nearly three times that.

A lot of it is thanks to personalization, making the company one of the best marketing stories in retail.

You can see Crocs will customize some of its shoes on the shelves to inspire some of that creativity amongst its shoppers.

Each of these gibbets cost $5 and the metal ones cost $7.

The margins are amongst the best.

To this day, they are amongst the best.

We've seen this from like Nike and On and Hoka.

They all want to have that premium footwear over $160 where they get that big, fat, you know, 60% margin.

Crocs gets it, you know, selling the product under $100, under $50.

But reciprocal tariffs announced by President Trump on April 2nd, 2025 could threaten that competitive advantage by placing a nearly 50% duty on Vietnam, where the company imports much of its goods.

So how did Crocs make a cultural resurgence?

And could the imposed tariffs threaten its business?

These are gibbets.

They're charms that go inside the holes on top of the Crocs.

In 2024, the company said they brought in $271 million worth of sales from these alone.

That's about 8% of the company's total sales in 2024 and a key driver in one of the biggest comebacks in retail.

But the idea didn't come from Crocs.

A couple in Boulder, Colorado created them back in 2005.

The product experienced rapid growth, seeing its revenue jump from $200,000 to $2 million per month from February to August of 2006.

Crocs acquired the company for $20 million that same year.

Could you have ever imagined that gibbets would become as successful as they are today?

No, not at all.

So when I first joined the company in 2014, the gibbets business has actually declined.

So between 2006, when the company purchased it, which was before my tenure, it actually grew to, I think, a peak of about $80 million and then declined fairly rapidly because they weren't putting innovation or imagination into it.

But then we reimagined gibbets.

We used referencing social media listening to look at what icons or items will be trending.

Leaning into personalization has paid off.

Anytime we have like a segment or a business, like a sub-segment of a business, anything that sort of like hits that double-digit 10% marker, it becomes meaningful.

Do you have any insight into how many of your shoppers are buying gibbets to go along with the Crocs?

Yeah, we think about three quarters of our consumers are actually buying gibbets according to our own proprietary surveys.

It's one of the highest margin pieces of the business, if not the highest.

Actual absolute dollar value of it is so small.

But the point is that it's not building a business off of that.

But as an add-on, depending how many you buy, it can increase the transaction size by 10, 15, 20%.

I think I found the one.

It's 3D.

It'll be popping out of the shoe.

See how that looks on there.

If you buy Crocs, you may be really comfortable, but you're giving up some ego or social value.

And for years, this example went well and people would laugh.

And then a couple of years ago, one of my students raised his hand and was like, actually, you're wrong.

Crocs are cool now.

As it went through the financial crisis 2008, it really hit some speed bumps around having too much inventory, around demand dropping off extremely rapidly, really because they weren't marketing or promoting the product appropriately to extend its reach.

In the decade that followed, there were multiple years where the company wasn't profitable.

Reese was appointed as CEO in 2017 and spearheaded the Crocs turnaround story.

They went back to basics in terms of they had this unwieldy product portfolio of 250 and they went back to their original clog and basically used it as a canvas for self-expression.

The biggest thing I saw from a messaging perspective was their shift from trying to convince consumers that it was about comfort and function to basically saying, yeah, we know we're ugly, but that's why you should love us, because that's what makes us one of a kind and unique.

Part of the Crocs comeback story centers on its ability to drive demand through limited drops and releases.

They partner with brands like Pixar and make custom designs like this one from Monsters, Inc.

Some customers absolutely love it and can't wait to get it and then some number of customers, this is officially the ugliest Croc they've ever seen.

That strategy is particularly effective because it's not just about limited availability, it's also about driving conversation.

The company also began an influencer-led social campaign and collaborated frequently with We have, you know, some of the most successful ones we've ever done or, you know, like our Post Malone or we did Bad Bunny and it wasn't about the amount we sold, but the amount of interest that we had.

They sold out very, very quickly.

The turnaround efforts really took hold in 2021, coupled with pandemic lockdowns creating demand for comfortable footwear inside the home.

Plus, the shoes became a favorite amongst frontline workers that could easily slip off and sanitize their footwear.

The share price soared as the company grew its revenue by nearly a billion dollars between 2020 and 2021.

It's been on an upward trajectory ever since.

But since 2021, the stock has experienced some volatility.

Between 2021 and 2024, Vietnam accounted for more than half of Croc's production.

President Trump imposed 46% tariffs on imports from the country.

These increased costs would likely need to get passed on to the consumer in order to mitigate impacts to the company's margins.

Another threat to Crocs right now actually has nothing to do with the Crocs business itself.

It comes from a $2.5 billion acquisition of casual footwear brand Hey Dude in 2022.

When they acquired the brand, it was having a moment.

Then comes along like all the disruption, supply chain and all these other things, inflation's going up and the brand awareness is not universally, you know, high like it is for Crocs.

In 2025, Crocs has been hit with several class action lawsuits related to previous distribution practices of Hey Dude.

The lawsuits allege that the company was consciously misleading investors with Hey Dude's initial revenue growth by overstocking its products with third-party wholesalers.

You have to prove that they knew that demand on the other side of that was not going to be good.

So I would say they'll go down that path, but I don't know that there's a real merit and a threat to the company from that.

I'm not going to comment on the specific allegations in the lawsuit.

I would say that, you know, class action or stockholders lawsuits like this are not uncommon in situations where you see the underlying volatility in the stock.

I think we're very confident that we will prevail in this litigation.

Regardless of intention, over the past few years, there was more Hey Dude product in stock amongst wholesalers than there was demand.

Some distributors were discounting the product, which defied some pricing agreements put in place.

Crocs wanted to take back control of the brand, so they ended a lot of these distributor relationships.

But that slashed its sales.

In 2024, the company was also fined nearly $2 million by the FTC for suppressing negative reviews on its website and failing to properly refund customers.

Here's a look at the Hey Dude brand revenue since 2022.

Do you worry about kind of future of the Hey Dude's business and the thorn that it has presented itself over the past few years?

I don't worry about that at all, actually.

We have a rejuvenated new management team that we put into Hey Dude.

We came out of the back end of last year, Q3 and a Q4, we saw some really very strong positive signs around the Hey Dude business.

Sales of Hey Dude were flat for the last quarter of 2024, but down more than 13% overall for the year.

Crocs, on the other hand, was up about 9%.

Probably the single biggest thing that everybody wants to know is you are actually making investments and you're actually taking the hard-earned money from the Crocs brand and then you're infusing it and investing it into Hey Dude.

Now, they think that that is a good growth prospect.

Right now, the jury's out on that.

But while the future of Hey Dude remains a question, Crocs is focusing on global growth for its flagship brand.

Internationally, South and China have the most physical Crocs stores, but still trail the U.S. by a significant margin.

Less than half of the Crocs brand revenue currently comes from outside of North America.

Over the next sort of three to five years, if you're looking out for the growth horizon for Crocs, that business, you'll see some low single digit growth in the U.S. and the Americas, North America, and that's the smaller part of future growth.

Investors generally, they like the reliable, meaty part of growth to be the biggest part of growth.

We call this part of the story the balance of uncertainty.

What Crocs did very adeptly from a growth perspective in terms of acquiring new customers was by targeting these explorers, these trendsetters, and that's also part of that international strategy for Crocs, is how do they find the leaders in those other countries to make themselves fashionable and trendy.

What are some of the financial misconceptions that you believe investors might be getting wrong?

I think it's boom and bust.

What they're missing is the classic clog is really a blank canvas for expression.

We're very confident we keep it relevant to a broad base of consumers.

We can continue to sell millions of pairs of shoes every year.