Filed under: Products and services, Crocs Inc (CROX)
Yesterday, I wrote about Crocs Inc. (NASDAQ: CROX) and the problems the company is having in Japan. The government there has asked the company to consider changing the design of its footwear after reports that kids were getting hurt wearing its rubber sandals on escalators.
What’s interesting is that the reports about Crocs’ safety issues have all come from the media, not the company’s SEC filings. Back in 2006, ABC reported that Crocs can pose a danger on escalators. Some hospitals have even banned the shoes citing safety concerns.
But Crocs’ latest 10-K is devoid of any references to the concerns about the safety of the shoes.
A similarly struggling fad shoe company, Heelys (NASDAQ: HLYS), has also dealt with issues surrounding the safety of its footwear. From the risk factors section of the company’s latest 10-K:
Negative publicity relating to our products could cause our HEELYS brand to suffer and adversely affect our net sales and results of operations.
Various media outlets have reported on injuries suffered by users of our products and have quoted from or referred to medical studies and U.S. Consumer Product Safety Commission data relating to injury rates of users of wheeled footwear. This negative publicity and any future negative publicity relating to the safety of our products or products similar to ours could cause our HEELYS brand image to suffer and adversely affect our net sales and operating performance.
There’s more:
Additional bans on the use of our HEELYS-wheeled footwear due to public safety and liability concerns could adversely affect our net sales and results of operations.
Various places of business and other institutions, such as shopping malls and schools, have imposed bans on the use of our HEELYS-wheeled footwear due to public safety and liability concerns. If the number of businesses and other institutions instituting such bans increases in the future, consumers could find our HEELYS-wheeled footwear less appealing, which could adversely affect our net sales and result of operations.
By not disclosing safety concerns as a risk factor, Crocs appears to be sending investors the message that the safety concerns aren’t material. Whether reality will agree with that assessment remains to be seen.
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