14 Comments

Impressive performance!

I just subcribed, looking forward to your updates

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Appreciate that! Hope to have another note out soon(ish)

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Jan 8Liked by Paul Cerro

Yes, the only two companies I’ll consider owning in this space are $DECK and $CROX, both with best-in-class management. I do own $Crox

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I have a hard time getting comfortable with CROX. HeyDude I'm nervous on and still think crocs are a fad, despite owning a pair

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Jan 8Liked by Paul Cerro

Great, would love to hear your feedback. It does seem like they are taking market share from Nike for sure!

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The acquisition from $DECK was mind-blowing. Excellent acquisition

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Jan 8Liked by Paul Cerro

Interesting, what’s your opinion on Hoka?

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The next brand I'm going to try.

I don't even run in them. I just walk my dog and they don't hold up

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Jan 8Liked by Paul Cerro

Interesting, I just bought their Cloud-Monster sneaker. I was looking for discounts around holiday time but couldn’t find any. I ended up paying $175. However, the other models did have more sales. What margins are they aiming for?

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I've had 3 pairs of the cloud X's and I'm not buying anymore. The durability of their shoes is garbage.

And surprised you didn't see any, they were running 50% off promos for most of November

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Jan 8Liked by Paul Cerro

FYI: in Europe and especially in Germany you hardly find them on sale.. Prices below 110€ are very rare..

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Jan 7Liked by Paul Cerro

Great report. Just curious why are you short $ONON just because of valuation? The buisness seems to be doing very well.

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No it's not really derived from valuation it's more so because the brand has been building up inventory, taking aggressive discounting in order to move inventory and aiming for margins in the footwear space that are near unheard of to obtain.

Yes, they're everywhere but I believe there's a real supply/demand imbalance

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I can’t help you get over the FAD concern, but the fact is, Crocs has been around for over 20 years and has only grown more popular. It’s reasonably priced and has genuine utility, especially for kids and people who work on their feet. As long as the management maintains the brand value and avoids dilution, as seen in the early 2000s, they should be fine. The current management is likely best in class when it comes to branding and marketing.

Check out this article from 2009 highlighting Crocs’ struggles at that time: [https://ries.typepad.com/ries_blog/2009/10/how-crocs-crashed.html#:~:text=In%202008%2C%20the%20wave%20came,a%20huge%20surplus%20of%20shoes].

Regarding HeyDude, they definitely overpaid, but the brand is still in the early stages of growth and penetration. Many people aren’t even aware of Hey Dude, and early-stage growth problems resulted from changes in wholesale channels. I understand why Crocs acquired the brand; it has significant potential for expansion with a broader selection, as seen in their new designs like boots shoes etc.

The Crocs brand itself is worth more than the entire current market cap without growth. HeyDude, even without growth, is generating $100 million to $150 million of EBIT. They could sell it tomorrow for at least $1 billion.

As long as the market overcomes its fear, the company is repurchasing close to $150 million to $200 million per quarter. It’s a cash machine. Just my opinion.

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