Shoemaker’s Record Run Now Includes Marathon

0
Shoemaker’s Record Run Now Includes Marathon
In Gear: Meb Keflezighi in Skechers ad.

Which would have seemed more unlikely just a few years ago: that Skechers USA Inc. would outfit professional marathoners and score naming rights to the Los Angeles Marathon, or that it would rank second only to Nike among athletic shoe brands in the United States?

Or how about that it’s market cap would quintuple in just two years?

Likely or not, it’s all come true for the Manhattan Beach footwear company. Its stock has soared over the past two years. Year to date, it’s up more than 145 percent, which is tops among all Los Angeles County stocks that trade for more than $1. Skechers is now the nation’s second-biggest seller of athletic shoes, according to New York research firm NPD Group, and next year, its Skechers Performance division will replace more established running shoe brand Asics as the title sponsor of the marathon.

It’s been a swift rise for Skechers, which not long ago was still reeling from a class-action lawsuit over its failed Shape-ups line, which led to a $40 million settlement after the Federal Trade Commission ruled the company exaggerated the health benefits of the shoes.

Rick Higgins, senior vice president of merchandising and marketing for Skechers Performance, said he, too, was surprised that the marathon took Skechers Performance on as its title sponsor, but that it shows how far Skechers has come over the past few years.

“We were excited about how we’ve been able to turn the corner with credibility with the performance division,” Higgins said.

The footwear brand has come a long way in six years since it introduced Shape-ups, a line of shoes with curved soles that the company promised would help tone wearers’ legs and butts. They sold well at first, but Skechers ordered too many and ended up selling them at discount prices as the toning-shoe fad faded.

Since then, Skechers has offered customers an expanded product line with more than a dozen different categories, and it’s rolled out marketing campaigns featuring celebrity endorsements from pop singer Meghan Trainor, Beatles drummer Ringo Starr and boxing great Sugar Ray Leonard as well as golfer Matt Kuchar.

That’s led to tremendous growth. In this year’s second quarter, Skechers reported revenue of $801 million, the biggest quarter in the company’s history. The company’s stock has followed along. Two years ago, shares traded for about $31 apiece. They closed Sept. 9 at $135.76.

Finish line

Skechers isn’t only doing better financially, it’s also building itself into a serious athletic shoe company.

Higgins pointed out that up until 2009 the company was primarily a lifestyle and fashion brand and wasn’t making a concerted effort to break into the performance sector. He said the company’s experience with Shape-ups, while ultimately not successful, helped put Skechers in the position it finds itself in today.

“Shape-ups opened up the door for us I think from an innovation standpoint – outside of the marketing aspect of those shoes,” he said. “We learned a lot from that on selling more functional types of footwear and we wanted to approach the performance business as another area to grow.”

Higgins, who helped launch the Skechers Performance division in 2010, said its focus on attracting walkers and runners of all levels presented a big opportunity for growth, which has paid off.

Skechers is ranked as the No. 1 brand for walking shoes in the U.S. and comes in second for athletic shoes overall with a 5 percent market share, compared with 4.6 percent for Adidas, according to NPD. Nike still holds the top spot with a massive 62 percent share of the U.S. market.

Though there’s a wide margin between Nike and Skechers, Higgins said it’s still a big deal to outrank other, more established brands.

“When you put us in the same sentence with Nike that’s pretty amazing,” he said.

Tracey Russell, chief executive of the Los Angeles Marathon, said Skechers’ performance in recent years was very appealing when it was considering title sponsors for its yearly race.

“They have definitely put their stake in the ground in terms of the endurance space and the executives they’ve brought over from other footwear and apparel companies in endurance sports,” Russell said. “These guys are doing some creative initiatives and that was very interesting to us.”

New soles

Skechers Performance’s multiyear naming-rights deal with the marathon isn’t the footwear brand’s first foray into road racing events, though it marks the first time the division will have its name on the event. For the past three years, it’s been the official footwear and apparel sponsor for the Chevron Houston Marathon.

The brand is sponsoring more than just races. After marathoner Meb Keflezighi was dropped by Nike, Skechers decided to sponsor him. He later won the 2014 Boston Marathon, crossing the finish line wearing a pair of Skechers.

Though Skechers Performance had been around for a while by then, Higgins said Keflezighi’s win was a big deal

“Leading up to that, we had made a lot of inroads with specialty running accounts,” Higgins said. “Hardcore runners were very aware of what we were doing but the tipping point was the overall consumer market. A lot of people weren’t aware that Skechers had this performance side of the business.”

Skechers also signed former Nike athlete and marathon runner Kara Goucher last year.

Jeff Van Sinderen, an analyst with B. Riley & Co. in West Los Angeles, said in a recent report that Skechers is one of the few companies in the apparel and footwear space experiencing strong growth, expecting the trend to continue for the foreseeable future.

He also recently upped his price target on Skechers from $135 to $160 and gave the company a “buy” rating. Five other equity analysts have rated Skechers a “buy” as well.

No posts to display