Crocs is feeling the strain of US trade policy, with its leadership warning that mounting tariffs could significantly disrupt both operations and consumer demand.
The footwear brand was among 76 companies in the industry to recently send a letter to President Donald Trump, urging that footwear be exempted from the latest wave of tariffs, according to Retail Dive.
On a call with analysts Thursday, CEO Andrew Rees outlined the financial risks posed by the current tariff mix. A 10% additional tariff applied to all imports would equate to around $45 million in annualised cash costs, while the steep 145% duty on Chinese goods could push that total to approximately $130 million.
That projection, while significant, was better than anticipated. “We thought the impact would be at least twice as high, so this update was very encouraging,” wrote Tom Nikic and his team at Needham in a Thursday research note.
Rees cautioned, however, that the challenges extend beyond the direct hit to margins. “The daily uncertainty as to the level of these tariffs makes it incredibly hard to plan and predict both short- and long-term impacts to our business,” he said. Still, he pointed to Crocs’ “well-diversified sourcing mix” as a key strength.
Currently, Crocs sources about 47% of its products from Vietnam, 17% from Indonesia, and 13% each from China and India, with Mexico and Cambodia contributing around 5% each. But those proportions are shifting rapidly.
“If that remains in place, we would very unlikely incur that $130 million because we just simply wouldn’t bring the goods in,” Rees explained. “We’d cancel off some orders, and I would say we are rapidly shifting sourcing to other countries.”
Consumers may also feel the fallout. Rees warned that demand for footwear and other goods could weaken if higher prices begin to take their toll. “Particularly given the potential for increased costs and higher prices across the industry, that could further burden an already choiceful consumer,” he said.
To brace for the uncertain macroeconomic outlook, Crocs has already trimmed roughly $50 million from this year’s expenses and continues to seek further savings.
The company also plans to raise prices where possible, with Rees noting that this will likely become a broader trend across the sector.
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