THEIR BEST FOOT FORWARD
Skechers is out-stepping larger rivals with its combination of affordable fashion, playing into a larger trend that has seen kids turn away from high-priced athletic sneakers in favor of so-called lifestyle brands.
In Skechers’ favor is a nimble manufacturing process that lets it shave months off its shipping time, allowing it to wait until trends are proven before rushing product onto the market. Because its sneakers lack the technical guts of high-performance basketball or running sneakers, Skechers can get merchandise onto a retailer’s shelves within three months of taking the order, compared with nine months for Nike, analysts said.
Then again, Skechers sneakers, typically priced around $50 (compared with more than $100 for Nike’s Air Force Ones), are not meant to be worn on the basketball court or the track. That fact has won over teens tired of paying up for athletic sneakers that serve mainly as fashion statements.
True, hip-hop stars have not rapped about Skechers sneakers the way Nelly has in the song “Air Force Ones.” But the $23.9 million Skechers earned in the most recent quarter, up 44 percent from the prior year, has been music to investors’ ears.
The stock is up 21 percent in the past 12 months, and several analysts say it can go higher.
“Skechers is in the sweet spot,” said John Shanley of Susquehanna Financial Group.
Not everyone is a fan. Some observers worry that Skechers remains too vulnerable to the whims of fashion and too reliant on its founders, Chairman and Chief Executive Robert Greenberg and his sons Michael and Jeffrey Greenberg, who serve as president and a director, respectively.
The elder Greenberg is perhaps best known for starting L.A. Gear, which took off on the aerobics craze of the 1980s and then stumbled when the fad faded.
It wasn’t long before the Greenbergs were back on their feet, launching Skechers and taking it public in June 1999. After initial success, Skechers hit the skids in 2003, when earnings plummeted on fashion missteps, prompting observers to fret that another L.A. Gear was in the making.
Skechers pulled through and has since diversified to help protect it from a shortfall in any one brand. Today, the company also makes shoes under other names, including 310 Motoring and Red by Mark Echo. Heavy advertising, featuring stars like Christina Aguilera, helps to foster its edgy image.
Some bears worry that Skechers stock could again take a hit if second-quarter sales come in light as retailers shift orders to the third quarter. Adding to the concern is a spate of recent insider selling, though the Greenbergs continue to control 71 percent of the voting power through Class B shares.
One of Skechers’ biggest hits recently has been a response to the hugely popular Crocs shoes. Skechers introduced its own version, complete with rhinestones on the strap, and wholesale revenue is expected to hit $100 million this year.
Such quick-footedness has made Skechers a subject of buyout rumors. According to one report published earlier this year, Kohlberg, Kravis Roberts had been eyeing the Manhattan Beach, Calif.-based company.
Those who know the Greenbergs, however, say a sale is a long shot.
“My sense is that they want to continue running this company,” said Jeff Mintz of Wedbush Morgan Securities.