Skechers USA Inc. is moving to a new house.
In the face of impressive staying power despite the recession, the Manhattan Beach-based casual shoemaker is building a $200 million North American distribution center in Riverside County’s Moreno Valley.
The state-of-the-art, 1.82 million-square-foot warehouse – expected to be completed in spring 2011 – will replace 1.6 million square feet of space spread among five buildings in Ontario, where the company currently ships its shoes to customers throughout the U.S. and Canada.
Among other things, the move will save money by consolidating operations, allowing shoes to be processed with fewer hands and shortening the time it takes to get products into stores.
“It’s not your grandfather’s warehouse,” said Iddo Benzeevi, president of Highland Fairview, a Moreno Valley real estate development company that’s constructing the facility. “To call this a warehouse is like saying that a file drawer has the same function as the hard drive on your computer.”
The groundbreaking, planned for more than two years, comes during a strong rebound for the company. Early last year, Skechers stock was trading at just a fraction of its 2008 price amid a sales slump. But a string of new products has turned things around and shares have rebounded 500 percent this year.
The company has announced the launch of eyewear and medical apparel product lines; expanded its presence in South America and other international markets; and, most importantly, started making something called Shape-Ups, hot new footwear Skechers claims can tone wearers’ legs.
In February, the Manhattan Beach shoe manufacturer reported that fourth quarter sales rose 30 percent to more than $388 million. Net income hit $27.9 million, compared with a loss of $20.4 million the prior year.
“We’re growing,” said Skechers President Michael Greenberg last week, after a groundbreaking ceremony attended by Gov. Arnold Schwarzenegger. “Last year we shipped approximately 70 million pairs of shoes, and we’re aiming at hitting 100 million in the next 24 months.”
State of the art
The planned distribution center will aid that growth in several ways. Consolidating the warehouse operations from five buildings into one is expected to save an estimated $4 million to $5 million annually in lease and other expenses.
Most importantly, the state-of-the-art equipment will allow more efficient sorting, handling, storing, packaging and tracking of shipments to retailers, speeding the delivery of the shoes.
“The merchandise will get to each retailer more quickly so they will have more days to sell it,” Greenberg said. “Improving your turnaround even by two days is an achievement; this will improve it by several.”
Skechers Chief Operating Officer David Weinberg said the new technology also will allow shoes to be processed with fewer personnel.
“If you can imagine moving millions of pairs of shoes in boxes, the fewer hands that have to touch them, the better it is. We’ve put in automation to allow more movement with less physical touching,” he said.
The warehouse will employ roughly 1,000 workers – slightly more than the existing number – but over time that figure will level off.
“As the volume grows, you don’t want to hire too many more,” Weinberg said.
Jeff Peter, a consultant with Logistics Consultants Inc., a materials handling firm in York, Penn., that designs warehouses, said that state-of-the-art distribution centers are becoming the norm.
The centers include automated conveyor systems that can sort, inventory and pack shoe orders, for instance, according to their size, style and color. That capability is “not dramatically different” from a few years ago, but the equipment is much more efficient and reliable, Peter said.
“Technical hardware and computer software is much better now. If you can get the right product to the right customer in a timely and cost-effective manner, it’s a competitive advantage,” he said.
That potential advantage has prompted other major companies to build what they described as state-of-the-art distribution centers in recent years. Among them was Fresh & Easy Neighborhood Market, the grocery chain owned by U.K.-based Tesco, which recently built a $150 million manufacturing and distribution center spanning 88 acres in Riverside.
