How the hole went from the shoe to the bubble... and maybe back.

1. Marianna Malaspina, Global Supply Chain Management, Prof. D. Klotz, Fall 2008

2. The Product Shoes 2

3. Financial data 3

4. Simple and functional product, yet very new and funky. Global world strategy Supply chain that provided a competitive advantage: 2-3 weeks, in season, product replenishment. Core strategy 4

5. Crocs Supply chain: 1st phase Immediate purchase of the Canadian Manufacturer and acquisition of proprietary resin croslite (comfort and odor resistance) Canada for 100% of production USA Europe Compounding In Italy Molding of Croc shoe By Foam Design in Canada Boxing In various assortments Denver Distribr New pellets with color Buy chemicals 5

6. Crocs Supply chain: 2nd phase (2005) Starting from 2005, large contract manufacturer in China Boxing In various assortm. USA Europe Molding of shoe By Foam Design in Canada Buy chemicals Compounding In Italy New pellets with color Denver Distrib. Molding of shoe China Manufacture Boxing In various assortm. 6

7. What a difference 5 years make… 2002: 1 model, 6 colors 2007: 250 models, including: Ocean Minded, YOU by Crocs (fashion) Bite footwear models; licensing agreements with Disney, Nickelodeon, Marvel, DC Comics and Warner Bros., and introduced a limited edition line of footwear and Jibbitz charms featuring such popular characters as Cinderella, Ariel, Mickey Mouse, Sponge Bob Square Pants, Dora the Explorer, Spiderman and Batman; Introduced Crocs at Work line that offers Crocs shoes targeted towards healthcare and food industry professionals; Developed Crocs Rx line: the Relief, the Cloud and the Silver Cloud. Targeted towards consumers who require specialized footwear that provides relief from certain medical conditions, such as diabetes, plantar pain, heel pain, metatarsalgia, achy feet and post-op conditions; and Entered into and extended existing collegiate licensing agreements with various colleges and universities, and our sports licensing agreements with, among others, NFL, NHL, MLB, AVP, NASCAR and more recently the Olympics, Gaelic Athletic Association and Australian football league 7

8. Manufacturing In 2007: 17% manufactured by Company owned premises in North America, Italy and Brazil 56% footwear products from third-party manufacturers in China 27% footwear products from third-party manufacturers in Bosnia, Vietnam, Romania and the U.S. Crocs also kept the Florida manufacturer for just one high volume product with a Made in the USA label Continued manufacturing in Canada as well, in part because of duty considerations (e.g.: Canada/israel no duty, with Crocs sales at 1.2 million pairs in 2006 in Israel). Continued the compounding in Italy: this resulted in SC inefficiencies in this phase of Crocs development In 2006 Crocs control of the compounding activity, creating state-of-the-art compounding facilities in Canada, China and Mexico. Change in warehousing model: from contract warehousing in Colorado to company own warehousing (added to each factory) with direct shipment from manufacturing premises to big Clients’ DCs. The goal: controlling the strategic order fulfillment function in Asia 8

10. In general: products for Europe made in Europe, products for Asia made in Asia.Flexibility and lead time 9

11. Geographical Sales In 2007: U.S. sales: 52% of total revenues, (compared to 68% in 2006 and 93% in 2005), 13,000 stores. International sales: 48% of total revenue, 19,000 international customer store locations, including 25 Company-operated retail stores in a variety of locations including Canada, Finland, United Kingdom, Singapore, Hong Kong, Japan, China and the Netherlands An interesting forecasting aspect: products generally equally sold in each market: test product in the ss season in the southern emisphere and the result would be indicative of how Europe and the US would respond. 10

12. Company Owned Stores U.S Retail Stores Crocs Kiosks 138 Crocs Retail Stores 4 Crocs Outlet Stores 6 Total 148 International Retail StoresCrocs Kiosks 36Crocs Retail Stores 25 Total 61 11

13. Retailing channels Initially: small retailers Advantages: Willing to take more risk Willing to work with Crocs on problems such as stock out and shipment delays, while large retailers charged hefty penalties for an order past cancellation date. Important for brand building and presence even after majority of sales went to large retailers. By 2007: 75% of sales large retailers (shoe stores, department stores and sporting goods sales) 12

14. Logistics 2007 18% shipped from Company owned manufacturing facilities (940,000 sf) and third-party manufacturers directly to the customer. 82% fulfilled by 20 distribution locations strategically located throughout the world. Crocs owns warehouses in Australia, Brazil, California, Colorado, Canada, Finland, Hawaii, the Netherlands, India, Japan, Mexico, Puerto Rico and Singapore. and by third-party operated distribution centers located in Canada, Colorado, Dubai, the Netherlands, Hong Kong, Japan, Kansas, Korea, New Zealand, and Taiwan (750,000sf). 1.7 million square feet of space : flexibility to meet rapidly changing business requirements and positions Crocs to support the growth of all of their brands (e.g.flip flop sandal explosion in 2006: projected 250K, sold 2.5M). Production capacity at 1M above actual monthly plan. This additional 1M can be turned on at a minute notice. Quite impressive. In December 2007,agreement with Manhattan Associates to provide warehouse management systems within all Company-operated distribution centers. The implementation of their software is scheduled to be strategically rolled-out in all locations over the next 24 months. 13

15. The supply net after 2005 Canada Compounding + Mnfct 19,000 International Retailers Nordstrom DCs Dillard’s DCs Italy compound + mnfc Bosnia and Rumania third party mnfctr 13,000 US retailers Dick’s Sporting Goods DCs Vietnam third Party mnfct Colorado wrhs Mexico Cmpndg Florida Mnfctr, 1 high volume prodct + wrhs China 3rd p. Mnfctr 55% of Pr.+ compndg+ wrhs Brazil Company owned mnfc + wrhs 14

17. Higher costs of materials15

20. No excess inventory – but this has dramatically changed in 2008

21. Yes to acquiring excess capacity16

22. The stock – (or what a difference a year makes…) ' 17

25. No excess inventory – but this has dramatically changed in 2008

26. Yes to acquiring excess capacity18

27. The importance of a committed strategy The Crocs phenomenon has by now crashed as a Wall Street favorite, but we think they have found a very fit logistic model and the product has real value, especially the original one. We wonder if part of its recent debacle may not be due to “too much of a good thing”: how did the company expect to be able to handle an exponential increase in SKUs while maintaining almost real time response for over 33,000 global customers at a low price? Maybe a slowdown would have been advisable, consolidating the brand and the Company’s already remarkable organizational skills before taking on additional different products which contributed to distract the Company from its core expertise. Brief comments 19

28. Thank you for listening to me! Do you have any question? 20

30. Crocs 10-K

31. “Crocs: Revolutionizing an Industry’s Supply Chain Model for Competitive Advantage”,Stanford Graduate School of Business case, 2007

32. Rick Munarriz, “Ugly Shoes, Pretty Profits”, The Motley Fool, May 4, 2007

33. “Crocs Losing Foothold Among Young Consumers”, http://www.npr.org/templates/story/story.php?storyId=93150100References: 21

34. Year 2008 almost collapsed the company. However, 2009 has seen a strong improvement on the bottom line (a steep decrease in the final loss) in spite of a terrible global economic environment and decreasing sales. Main reason for improvement were improved gross Margins and reduction of impairments. The first quarter of 2010 shows a profit of almost 6M against a loss of over 22M for the same period in 2009. The company is opening 300 stores in the USA and seems poised for a stable come back. What we fear is that such a strong decline in SG&A could have an impact on the image: see for example bad store appearance in key retail areas such as Manhattan Upper West Side, where frequently piles of boxes are left in the windows instead of being properly stored. After reaching rock bottom at barely $1 in Fall 2008, the stock currently trades at about $ 10 and we believe has room for growth. Summer 2010 Update ! 22