Two years ago I wrote that I generally admired the managers of Skechers USA Inc. The Manhattan Beach shoemaker gets kicked around by competitors and various critics, I noted, but it’s a smart and laced-up company whose managers control the inventory and costs well.
Better yet, I opined, its products were great: Skechers’ reasonably priced but fashionable shoes were loved by my wife and my then-8-year-old daughter.
I asked: How many fashion-oriented companies can make products that appeal to adults and kids at the same time?
Now, I must take a few giant steps back and ask a different question: How can a company stumble as badly as Skechers has?
In recent months, Skechers’ margins have eroded and sales have skidded. The stock price has swooned to half of where it was in June. Earnings, reported three weeks ago, were nearly 80 percent below last year and 20 percent below analysts’ expectations.
The problem: Managers misjudged spectacularly on their Shape-up product. Those are the rocker-soled shoes that are supposed to keep you toned if you just walk around normally. Executives hired big-name spokespeople and jammed their pipeline with Shape-ups, sure that their product was a shoo-in.
Turns out, toning shoes were not a trend, just a fad. And a tepid one at that.
The Shape-ups I bought my wife last year are in some dark corner of the closet, and the daughter never wanted a pair. So I can now report that the company has made a product that neither adults nor kids like.
Sam Poser, an analyst with Sterne Agee who put a “sell” rating on the stock in December, said on CNBC last week that Skechers oversaturated the market with the product and “they’ve had to assist their retail partners with markdown money.” Skechers managers should have slashed prices and cleared out the product last year, he said, but they still are balking about doing so.
“This product isn’t fine wine,” Poser said. “It isn’t getting better with age.”
In other words, the company that two years ago had good products and smart management now has a bad product and has made poor management decisions.
The interesting part comes in the next couple of quarters. Let’s see if Skechers management can successfully walk this company back.
• • •
Question: How did wealthy people get rich?
A lot of folks would answer by saying, “They inherited it” or “They were a CEO.”
True, some people get wealthy that way. But if you look over the list of Wealthiest Angelenos in this issue, you’ll see those people are the minority.
By my count, only seven people on our list of 50 inherited their money. And only two – Michael Eisner and Ray Irani – made the bulk of their money by working as a hired chief executive.
In fact, most of the people on our list amassed their fortunes the old-fashioned way: through entrepreneurship. They were talented, smart, driven people who created companies or enterprises of some kind and worked doggedly at it.
Sure, some of them came from nice homes and had a head start, but many didn’t. And if you go over the list, you’ll see such names as Cherng, Chang and Soon-Shiong – immigrants who had extra impediments but didn’t let that stop them.
OK, so this is not a profound thought. It’s just a reminder that wealth in this country is not reserved for a few privileged heirs or for the handful of Ivy Leaguers clever and brash enough to become CEO of a big corporation.
It’s democratic, and it’s attainable by virtually anyone.
Charles Crumpley is editor of the Business Journal. He can be reached at email@example.com.
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