Sunday, November 25, 2007

What A Croc

There's a saying that goes "good ideas have a very short shelf life. Bad ideas take on a life of their own." Via Overlawyered we learn that the lawyers are going after the makers of Crocs sandals over a 47% decline in the stock price of the company following a decrease in earnings despite a 130% increase in sales. Apparently the company is dealing with distribution issues and a build up in inventory, which ties up cash and can be indicative of a slowdown in sales.

One brilliant theory as to why sales might be slowing down is that sandals are a seasonal item and demand might just fall off a bit with the arrival of Winter. That may be so (and I'm not putting the theory down), but I have an additional observation.

Crocs is a one trick pony. Its sole (no pun intended) product is a line of garish, neon-colored, ugly, plastic sandals. I have a hunch that the market for such a product might be somewhat finite and once the demand is satisfied, sales are going to crash unless the company comes up with a way to reignite demand or comes up with some new products. Crocs apparently hasn't.

Like most fad investments, unless you invest in it early and look to get out before it peaks, you will get burned. Once everybody else has already noticed, it's too late. I have no sympathy for the kind of herd mentality investors who get into these things and then start whining about it when the bubble pops, as it inevitably does. I hope the plaintiffs get thrown out of court.
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