Crocs CEO Andrew Rees on Tariffs: Vietnam Concerns Loom, Industry To ‘Go Up In Terms Of Price’
While Crocs Inc. CEO Andrew Rees sees pricing as a potential lever to mitigate against tariff impacts, he said Vietnam remains a big concern.
“Depending on the level of incremental costs that may come from tariffs and other factors, we do expect the industry to go up in terms of price,” he told analysts during a conference call on Thursday after the company posted first quarter earnings results.
Rees explained that price adjustments aren’t necessarily a bad thing. “So if prices go up, we would expect volumes to go down and would therefore plan accordingly,” he said. But the CEO noted that a “higher price, higher margin and maybe slightly lesser volume is a much stronger place to be.”
The CEO said Crocs is being “super strategic” on pricing, and has done some “very targeted price increases” to mitigate selective issues. But overall, he said the company is in a “wait-and-see mode” while it also is working on where and how to manage future pricing.
“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,” Rees said. “As we sit here today, we have a well-diversified sourcing mix.”
He said sourcing for the U.S. market in 2025 includes 47 percent from Vietnam, 17 percent from Indonesia, 13 percent each for China and India, and 5 percent each for Mexico and Cambodia. And given the uncertainty after the 90-day pause ends, Rees said that tariffs could escalate further and have an additional impact in the countries where the company currently source from.
That uncertainty over the financial impact of future tariffs is also why the company suspended guidance for 2025. The CEO said that if one were to presume the baseline 10 percent incremental tariff from all sourcing countries for goods into the U.S., the cost would be $45 million for the year.
But if an incremental 145 percent tariff on China remains in place, along with the 10 percent on all other sourcing destinations, the presumed cost impact for the year instead would be $130 million with the current sourcing mix, he said. But he also emphasized that the company would be “very unlikely to incur that $130 million because we just simply wouldn’t bring the goods in. We’d cancel off some orders.” And the company is also “rapidly shifting sourcing to other countries,” Rees added.
Looming on the horizon is the uncertainty of Vietnam in terms of reciprocal tariffs. He said the one thing the “whole industry is worried about if a reciprocal tariff remains in place [is] Vietnam. That’s a huge amount of production for us and everybody else. That would be incredibly hard to mitigate.”
He also said he hasn’t seen any price increases from its key manufacturing partners. Anyone trying to transfer volume to new manufacturing partners in Southeast Asia could be facing high prices, but “that doesn’t apply to us as this stage,” Rees said.
The CEO said the company has identified $50 million of additional savings — but didn’t elaborate — and will continue to evaluate other actions for further savings. He also noted the difficulty in predicting how consumers may respond to current challenges, including potentially softer demand for footwear.
At the Crocs brand, Rees said the company was making progress towards introducing new products, such as sandals.
“We see sandals as an avenue for attracting new consumers to our brand. Over the last 12 months, 54 percent of consumers who purchased sandals and our own current channels were new to the brand,” he said. “This translated into incremental shelf space with our retail customers.”
And at Hey Dude, the CEO said the company continued to make progress on “stabilizing the brand in America.” The company also is working on building out its Hey Dude community, and the brand had its first TikTok Shop Super Brand Day where it was ranked the Number 1 brand across the platform, he said. Of the two brands, its Hey Dude that has the higher percentage of production in China.
The company reported that first quarter net income for the period ended March 31 rose 5.0 percent to $160.1 million, on a revenue slip of 0.1 percent to $937.3 million. The company in December signed a licensing deal with Concept One to build its accessories offerings as it tries to evolve into a lifestyle brand.