Skechers USA Inc. has a hot-selling shoe with an odd-shaped sole that the company claims will help people burn calories and get their bodies supertoned. But it has suddenly been tripped up by a study that says the claims aren’t true.
So the Manhattan Beach company has launched a fierce counterattack to thwart the study by the American Council on Exercise, which says wearers don’t get much of a workout from Skechers’ Shape-ups and similar “toning” shoes. The company is also putting on a wider PR offensive to respond to other experts who have questioned the effectiveness of such footwear, and to fight two lawsuits alleging the advertising for Shape-ups violates California law.
Skechers has hired Century City crisis communication firm Sitrick & Co. to tell its side of the story and has brought in defamation attorney Anthony Glassman and high-powered litigator Daniel Petrocelli, famous for his victory in the O.J. Simpson civil case.
“We believe that we’ve been unjustifiably attacked by a couple of random experts and one flimsy study,” said Leonard Armato, president of Skechers’ fitness group. “We want to set the record straight.”
The company has a lot riding on the shoe. It has invested in an expensive advertising campaign. And thanks at least partly to the success of Shape-ups, the company went from a second quarter loss in 2009 to a profit this year. Its stock price has doubled over the 12-month period.
Armato, a former sports agent who’s represented Shaquille O’Neal and Kareem Abdul-Jabbar, and also headed the AVP Pro Beach Volleyball Tour, joined Skechers about six months ago to help the company grow its lineup of fitness footwear. Since then, he’s become the point man in Skechers’ war against the study.
Armato said the company has received more than 12,000 unsolicited testimonials from customers saying that Shape-ups have helped them lose weight, tone their muscles and improve their posture.
Last week, the company announced that an independent panel in Wellington, New Zealand, found that Skechers’ claims about the fitness benefits of Shape-ups are not likely to mislead consumers. It’s also set up a website with studies showing the physical benefits of rounded-sole shoes such as Shape-ups.
The American Council on Exercise study was released July 20, but didn’t immediately gain notice; news media picked it up within a few weeks. Skechers counterattacked with its first press release dismissing the study Aug. 10.
The company’s stock price was down about 27 percent to $26 on Thursday, compared with the beginning of August.
Analysts suspect investors may believe the company won’t be able to maintain the level of sales the shoes have been hitting. Or consumers could be pulling back due to the end of summer shopping season. But the study is seen as a significant factor in the falling share price.
“Skechers is a company hitting on all cylinders,” said Howard Davidowitz, chairman of New York retail consulting and investment banking firm Davidowitz & Associates Inc. “But the company’s stock price has been tremendously affected by this study because it’s calling into question a central part of what Skechers has been advertising.”
Shape-ups were advertised aggressively when they were launched. The company recruited former pro quarterback Joe Montana, fitness celebrity Denise Austin and others to pitch the benefits of its Shape-ups, which the company claims in ads are a “great way to exercise while you go about your busy day.”
That’s because the shoes’ unusually shaped sole, or rocker-bottom, creates instability in wearers’ foot motion that simulates walking through sand barefoot, as Armato describes it.
But the American Council on Exercise claims the benefits are exaggerated.
The San Diego-based council, a non-profit that commissions studies on fitness products and is one of the largest fitness organizations in the United States, tested rounded-sole shoes, including Shape-ups; Reeboks’ EasyTone shoes; and a model by Masai Barefoot Technology, a Swedish company that originated the trend in 1996.
Researchers tested the exercise response of 12 physically active women and the muscle activation of 12 others who wore the three different toning shoes while walking on a treadmill at different speeds and inclines. The report found that shoes made by the three companies don’t tone wearers’ muscles or help them burn more calories.
Armato questioned the legitimacy of the study.
“It’s almost like a public relations statement that the group did in the most self-serving way possible,” Armato said. “And it got picked up a lot and now it’s our job to explain why it has no scientific validity and point out the glaring weaknesses that people might not be able to see on the surface.”
Cedric Bryant, chief science officer at the American Council on Exercise, said the organization’s goal in commissioning studies on fitness products is to inform the public.
“I do find it a bit disappointing, some of the inflammatory remarks some of the manufacturers have chosen to make with regard to the reports on the toning shoe study,” Bryant said. “We fund these studies because we want to try and get answers to determine what happens when one wears these toning shoes compared to when one wears running shoes. And it allows the consumer to make his own decision.”
The two federal lawsuits over the company’s advertising were filed in San Diego and Los Angeles in June and July, respectively. The suits, which were filed by individuals but seek class-action status, claim that Skechers’ advertising for Shape-ups violates California’s Unfair Competition Law and the California Consumer Legal Remedies Act. They both seek damages and a correction in the company’s advertising.
Skechers’ denies the allegations and defamation attorney Glassman said the company plans to defend them vigorously.
Fashion to fitness
Skechers founder Robert Greenberg learned about rounded-sole shoes from Masai Barefoot, the Swedish company. After seeing Masai Barefoot’s shoes, he decided to develop a similar technology for Skechers.
Skechers released the original Shape-ups in November 2008 and sales were strong and built steadily. The company has since created other styles of shoes made with the comparable technology, including Tone-ups, sandals designed to tone wearers’ legs. The Shape-ups and Tone-ups sell for $49 to $130.
In the footwear market, toning shoes have become the fastest growing category in the last several years. Susquehanna International Group LLP, a market analysis company in Bala Cynwyd, Pa., estimates that toning shoes will hit $1.7 billion in sales this year, compared with $250 million in 2009.
Skechers is the leader among footwear companies, including powerhouse Reebok International Ltd., that sell toning shoes.
“Skechers has a wonderful pair of sneakers, and that is the bottom line,” retail consultant Davidowtiz said, “because that is what the consumer thinks, and the consumer is voting with their pocketbook and their feet.”
Skechers doesn’t break out sales for its toning shoes, but its overall earnings beat analysts’ expectations for the second quarter with net income of $40.2 million for the period ended June 30, compared with a net loss of $5.9 million for the same time in 2009.
Christopher Svezia, a research analyst at Susquehanna who follows Skechers, said the study did some damage to the stock price, but he’s bullish on the shoemaker’s long-term prospects.
“When it initially came out, the stock certainly got hurt by it,” Svezia said. “However, I don’t think it will have a material impact on consumer perception of the product.”
The website that Skechers launched in its counterattack of the American Council on Exercise study, www.toningshoestudies.com, features seven alternative studies on rounded-sole shoes, including two on Shape-ups that were paid for by Skechers and two on rounded-sole shoes that were published in peer-reviewed journals.
Robert Girandol, an associate professor of kinesiology at USC, reviewed the American Council on Exercise study and the ones posted on the Skechers’ site at the Business Journal’s request. He agreed with the council’s conclusion.
“The chances of burning extra calories because your shoe or foot comes down in a natural motion, just doesn’t make any sense,” Girandol said. “Basically, if a person is looking to burn more calories, they should walk farther, walk uphill or walk a little faster.”
That’s one thing everyone can agree on. Walking will burn calories, and Shape-ups and other toning shoes are encouraging people to do just that.
“We are getting people moving, and that in and of itself is a good thing,” Armato said.