Staff Reporter

It may not have celebrity endorsers like Shaq or Michael Jordan. But athletic shoemaker K-Swiss Inc. of Westlake Village is scoring steady earnings gains, even as its flashier competitors including Nike Inc. and Reebok International Ltd. seem to be stumbling.

While the giants keep concocting ever-more-elaborate shoe concepts, K-Swiss keeps growing by not straying far from the same simple, white-on-white tennis shoe it has been making since 1966.

"They have a niche product that is doing very well," said Jeffrey Van Sinderen, an analyst at securities research firm B. Riley & Co. Inc.

Part of K-Swiss' success, according to Van Sinderen, is a stepped-up advertising budget and small production runs. That helps keep the shoes out of discount bins, where a brand's reputation can be damaged.

But the primary driver of two straight years of consecutive earnings growth has been a simple change in fashion trends.

"One of the major macro kind of trends is the switch from denim to khakis, and they have capitalized on that, primarily with their white-on-white-type shoes," Van Sinderen said. K-Swiss shoes simply look better with khaki pants than do the shoes of many of its competitors, he said.

"We do make a shoe that you can call the Oxford button-down, blue blazer of athletic shoes," agreed Steven Nichols, K-Swiss' president and chief executive. "It goes well with khakis. It's very vanilla and when you don't know what to wear, this works. And you're always in good taste when you wear this."

But in the fickle world of fashion, nothing is forever. That has led to concerns about how long K-Swiss can maintain its stellar growth.

The majority of K-Swiss' revenues come from its line of white-on-white "Classics" the upper of which is made from just three separate pieces of leather. The Classic has remained virtually unchanged over the last three decades and is marketed today as a casual shoe. It is part of a line that also includes the K-S Collection and the Limited Edition line. Shoes in those two lines are offered only for a limited time, which is intended to boost demand for them.

While the strategy has worked so far, Van Sinderen said there is growing concern about long-term success.

"The issue is, they have to keep coming up with a new shoe every season, or every couple seasons in the case of the K-S Collection," he said. "The question everyone has is how long can they continue to put out great shoes every season without stumbling, and I think that's on everyone's mind."


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