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Fri, 16 Mar 2012 10:11:56 GMT | By Michael Brush, MSN Money
Eight companies with cult followings

Crocs: A fad turned bad



Crocs (© Lucas Jackson/Reuters)
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Crocs (CROX.O), which sells those rubber clogs that people either love or hate, offers several lessons in how to tell a cult from a fad, and how to spot the warning signs of a fad turning bad.

Crocs certainly had all the signs of approaching cult status. The shoes sold mostly on word of mouth. Those who wore them were eager to tell you exactly why. Sales rocketed.

But then came a clear signal that the product was more passing fad than lasting cult: Competitors launched successful imitations. This is one reason Crocs ran into trouble in 2007-08, when its stock tumbled to below $5 from above $70.

Another warning sign: The company never rolled out successful extensions of its popular product, or at least nothing that caught on in the same way. "Crocs got so associated with the clog shoe; it tried to get into apparel but hasn't had much luck with that," says Hottovy, at Morningstar.

With Crocs stock now trading around $19, anyone who mistook Crocs for a long-term cult company and bought the stock much higher in 2007 is still feeling the pain.

* Bing: Brands that may disappear in 2012

At the time of publication, Michael Brush owned or controlled shares of the following funds or companies mentioned in this column: Sirius, which he has suggested as a "buy" in his stock newsletter, Brush Up on Stocks.

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