K-Swiss Inc. may not sell the flashiest sports shoes on the market, but that may be the good news.
Last year, the Westlake Village-based athletic footwear maker saw its sales fall dramatically from 1999, part of a general slowdown in consumer spending that hurt the apparel and recreational shoe industries. Nonetheless, the company's stock rose for much of the year, hitting a 52-week high of $28.50 a share on Nov. 6, and last week was trading at around $22.50.
That's in large part because K-Swiss continues to garner praise for sticking to its basic strategy of selling sports shoes that are simply designed while targeting the free-spending teenage and young adult market. At least some analysts think that, after years of wearing the most garish basketball shoes available, young males are going for the clean, white tennis shoe with which K-Swiss is most identified.
"Teenage boys are back to looking at footwear as a major component of their wardrobe," said John Shanley, senior vice president at Wells Fargo Van Kasper. "We think K-Swiss, in terms of merchandise and focus, is well positioned to take advantage of this."
That being said, earnings last year were much lower after a record-breaking 1999. In the third quarter of 2000, the company reported net income of $6.4 million (59 cents per diluted share), a 32 percent drop from the $9.3 million (80 cents per share) posted in the same quarter a year earlier.
But even while admitting that fourth-quarter numbers, which are expected in the next couple weeks, will reflect a similar drop compared to the same period a year-earlier period, company officials point out that K-Swiss did better in 2000 than in any year during its 35 years of existence, except one.
"In 1998 we had the biggest year in the history of the company: more than $160 million in revenue and $12.5 million in profits," said president and chairman Steven Nichols. "Then in 1999 we did $285 million in revenue and $34 million in profits. It was unbelievable. (For 2000), sales will be somewhere over $200 million. So we'll have the second-best year in the history of the company, but significantly less than the year before."
The success of 1999 was fueled by strong consumer spending, but was also helped by the shoemaker's foray into athletic training shoes. K-Swiss spent upwards of $20 million promoting its cross-trainers with ads spotlighting rookie professional athletes in football and hockey and the shoes have become a nice, if still relatively small part of the business, comprising 8 to 9 percent of total sales.
For reprint and licensing requests for this article, CLICK HERE.