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Crocs, Inc., 2022: Déjà Vu All Over Agai...

Lipson, Marc L., L...

Case

Crocs, Inc., 2022: Déjà Vu All Over Again

Lipson, Marc L.; Loutskina, Elena; Rayaji, Abanikash

F-2066 | Published January 30, 2024 | 19 Pages Case

Collection: Darden School of Business

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Crocs, Inc. (Crocs) performed exceptionally well during the COVID-19 pandemic: Core product revenue almost doubled, and share price more than quadrupled. A recent acquisition was supposed to be another great step forward. Yet on May 25, 2022, the share price fell 74%. Now, the CEO needs to make sense of the shift in market expectations and articulate a clear strategic direction for Crocs that can address the concerns of two audiences: a disaffected and skeptical equity market and a fearful workforce. This public-sourced case is designed to build understanding of value creation in competitive markets, linking strategy and enterprise valuation. The analytic focus is on growth and margins, and the key takeaway is that growth creates value only when margins are high enough that the return on invested capital exceeds the cost of capital. A baseline model is provided in which to explore these dynamics. The case naturally motivates an engaging discussion of corporate strategy and allows students to see how market dynamics drive industries toward maturity where margins are tight and growth limited—exactly the economics that characterize the long-term steady state associated with terminal values in an enterprise valuation analysis. The set of comparable firms provided in the case spurs a lively discussion since they span very high growth stars, growing firms, and mature firms. This case has been successfully used in graduate classes and executive programs at the University of Virginia Darden School of Business. It is a capstone case in the “Enterprise Valuation” module of “Financial Management and Policies,” a course in the first-year core curriculum of the MBA program. It can be easily adapted for various audiences by adjusting the level of expected experimentation with the provided valuation model. Similarly, the discussion leader can shape the level of focus on strategy by introducing concepts and frameworks from strategy.

The case can be used for the following teaching objectives: (1) Help students understand how corporate strategy impacts a company’s valuation, especially the potential impact of large acquisitions on investor expectations. (2) Build student skill in assessing the competitive position of a firm and what that means for key drivers of enterprise value. (3) Build student comfort with valuation models and the assumptions that inform them. (4) Ensure students recognize what assumptions on terminal values are consistent with.