Metric sales

This hot shoe stock crushes Nike in 1 key metric

Since the start of 2021, the two Nike (NYSE: NKE) and the S&P 500 gained about 25%. While returns like this would otherwise be applauded by investors, a lesser-known and lesser-known shoe stock produced a cumulative return of 188%. Shareholders can thank soaring income and profits for crocs(NASDAQ: CROX) remarkable price appreciation. Not only did his actions significantly outperform world athletics clothes behemoth, but Crocs is also at the top of a very important financial indicator. Let’s see what it is.

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Keep more from every sale

During the last quarter, Crocs’ Gross margin was an impressive 63.9% compared to Nike’s 46.5%. And it’s not just a one-off phenomenon. With the exception of two separate quarters, Crocs has achieved a better gross margin over the past decade. Why is this important? Read on.

Since gross margin is the difference between what it costs to make a product and the price a customer pays, obviously the bigger the gap, the better. It’s also a clear sign of the pricing power, which is one of Warren Buffett’s favorite investing characteristics. In addition, a customer’s desire to pay a higher price is directly correlated with the difference and quality of a specific product compared to what its competitors offer.

That said, what makes Crocs’ higher gross margin even more extraordinary is that its shoes are priced much lower than Nike’s. “The average selling price in the third quarter was $ 24.42,” said Crocs CFO Anne Mehlman. Call for Q3 results with analysts. In contrast, Nike shoes – thanks in part to expensive Jordan shoes – sell for much higher prices.

Innovation (or lack of innovation)

Crocs shoes have a clean and simple design, and they are easy to assemble, which keeps costs down. They really don’t require a lot of innovation and forward thinking. Compare that with Oregon-based sports giant Nike where thinking outside the box and pushing the needle when it comes to design, fit and style is second nature.

Crocs is just having one of its best quarters, but the word “innovate” (or a variation of it) was only mentioned three times in its recent earnings call. By comparison, Nike’s management team uttered this keyword on 28 different occasions throughout. his last call.

Its easy-to-make shoes are also one of the main reasons Crocs has been able to meet the challenges in the supply chain. Starting production at factories that are not closed due to the pandemic is apparently a quick process, as the company’s Classic Clog shoe consists of just three components. “We will continue to diversify our manufacturing base. I think Indonesia is our most immediate target,” said CEO Andrew Rees.

The same production issues that Nike faces have forced the management team there to reduce the revenue forecast for fiscal 2022 to mid single-digit growth from the previous estimate of a low increase to two digits.

Don’t count Nike

Do not mistake yourself. Nike has an incredibly powerful brand and a long track record of outstanding success in the apparel market. In addition, his great push over the past few years to integrate technology into his business to improve the consumer experience is admirable. It’s also something other companies in the industry can learn from, including Crocs.

But Crocs is making a name for itself in the competitive footwear market. Investors should take note.

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Neil Patel has no position in the stocks mentioned. The Motley Fool owns shares and recommends Nike. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.