Skechers U.S.A., Inc.

founded: 1992

Contact Information:

headquarters: 228 manhattan beach blvd. manhattan beach, ca 90266 phone: (310)318-3100 fax: (310)318-5019 url: http://www.skechers.com

OVERVIEW

Skechers U.S.A., Inc. is an emerging global mega-brand in the lifestyle footwear industry that markets casual fashionable footwear to trend-conscious men, women, and children. The company's formula for success combines a top-quality product that meets customer expectations and an innovative global marketing strategy driven by fashion-forward print and television advertising. Also essential to the company's growth scheme is its broad range of domestic and international distribution channels: department stores, specialty and athletic stores, the Internet, and company-owned retail stores.

Since Skechers was established in 1992, the company's product offerings have grown from utility-styled workboots to include sport, casual, dress, dress casual, and its latest addition, roller skates. Celebrity endorsements have further increased Skechers brand profile. Teen pop icon Britney Spears began appearing in international Skechers Sport print ads in January 2001, followed by worldwide endorsement deals with actors Rob Lowe and Matt Dillon.

Skechers sells its products to numerous department and specialty stores including Nordstrom, Macy's, Dillards, Robinsons-May, JCPenney, Foot-locker, Famous Footwear, Genesco's, Journeys, and FootAction USA. The company also sells direct to consumers through more than 80 company-owned and operated Skechers USA retail stores, from New York and Los Angeles, to London, Paris, and Germany. Skechers sells its footwear in more than 100 countries though more than 35 major distributors. Additionally, Skechers sells its products to customers through its official online Web site.

COMPANY FINANCES

In fiscal 2001 Skechers reported record full-year results. For the year ending December 31, 2001, net sales climbed 42.3 percent to $960.4 million, up from $675 million the previous year. Net earnings rose 8 percent from $43.8 million or $1.20 per share to $47.3 million or $1.24 per share. Skechers Chairman and CEO Robert Greenberg remarked, "With a 42.3 percent increase in sales over 2000 and annual sales at nearly a billion dollars, we believe 2001 was an impressive year for Skechers. We are delighted that we continue to build the brand in 2001—across all channels of distribution and within each of the categories that we offer, and we increased market share both domestically and internationally." In a 52-week period, stock prices ranged from a low of $10.00 to a high of $40.30 and had a price earnings ratio of 12.3 for 2000.

Net sales for the fourth quarter 2001 rose 24.4 percent to $214.1 million compared to $172 million in fourth quarter 2000. Net earnings for the fourth quarter were $2 million versus net earnings of $9.7 million for the same period in 2000. Earnings per share in the fourth quarter were $0.05 compared to $0.26 per share in the comparable period of 2000. Gross margin in the quarter was
39.7 percent.

Skechers also implemented cost-cutting initiatives designed to cut general and administrative expenses. As of December 31, 2001, the company had $140.0 million in working capital, $29.6 million in long-term debt, and stockholder's equity of $199.0 million.

ANALYSTS' OPINIONS

Skechers has experienced rapid growth since its inception, increasing net sales at a compound annual growth rate of 39.7 percent from $90.8 million in 1994 to $675 million in 2000. This momentum increased into 2000 with a 60 percent increase in sales and a 109.3 percent increase in earnings compared to 1999. Analysts at Wedbush Morgan Securities predicts that Skechers will be in demand among middle-class customers in 2002 and benefit from assertive advertising and new product launches. Analysts project revenues of $1.15 billion for full-year 2002, a 20 percent increase, as well as earnings per share at $1.60 and price earnings ratio of 9.2. Skechers continues to build their brand with the unique approach of offering comfortable, stylish footwear at reasonable prices for all demographics, maximizing advertising dollars. Sales remain strong, particularly in Skechers Sport for Women, Skechers USA for Women, Skechers Collection, and Skechers for Kids. Additionally, Skechers by Michelle K. and Somethin' Else from Skechers were initially well-received.

HISTORY

Skechers founder Robert Greenberg, the self-proclaimed king of brand-building, has created a major league footwear label in a relatively short amount of time. The chairman and CEO of Skechers turned a strong promotional sense and a keen eye for trends into a household name. Moving out of the fashion industry in 1983, Greenberg stepped into footwear at the height of the aerobics craze, which became the birth of his new business,
L.A. Gear. Greenberg spotted missed opportunities in the women's and teen's athletic shoe markets, segments ignored by other manufacturers. Greenberg rode out the trend, resulting in revenues exceeding $900 million within 7 years. During a period of financial difficulty, Greenberg was ousted from L.A. Gear.

Undeterred, he established Skechers in Manhattan Beach, California, and began distributing R. Griggs Ltd. and other brands in 1992. Skechers filed suit against R. Griggs the following year for breach of contract and eventually the two firms canceled their licensing agreement. Greenberg then began designing his own brand of street-wise shoes for young trend-conscious men, one of the only markets not dominated by industry heavyweights. In 1993 the firm introduced the grunge-look "Chrome Dome," a worn-looking shoe that was picked up by Nordstrom and Foleys, among other retailers. The company signed licensing agreements for clothes and expanded operations to Europe and Asia. Skechers started to focus on athletic footwear and, in June 1999, conducted its initial public offering, selling seven million shares at $11 a piece. Greenberg and his family control about 80 percent of Skechers voting power.

Since 1999 Skechers has increased retail stores and in-store boutiques, expanded women's shoes, and diversified into children's shoes. In 2000 Business Week placed Skechers fifth on their "100 Best Small Companies" list and was named "Company of the Year" by Footwear News.

STRATEGY

Skechers business plan for 2001 was "Strategy, Focus, Growth." The result was a record year from increased net sales to wholesale and retail expansion, and a burgeoning international business. The company's long term plan is to capitalize on their premier brand status by continuing to capture an increased share of the global footwear market, which is estimated at $43 billion worldwide. Skechers took specific measures in 2001 to achieve this goal; the company assumed direct control of international business in parts of Europe, opened retail stores in key locations, introduced three new lines of shoes, and added styles to existing lines of Skechers Sport, Skechers Collection, Skechers USA, and Skechers Kids. The company also tightened its management team and increased their infrastructure to allow for the company's future growth. For 2002, the California-based firm will focus on further development of product lines, expanding new categories, broadening retail operations, and driving business through licensing deals.

INFLUENCES

Skechers marketing philosophy is "Unseen. Untold. Unsold." Skechers believes in the power of their advertising, and they promote the idea that Skechers is simply a must-have product. As an industry leader, Skechers goal is to maximize brand impact by keeping their message on consumers minds and the shoes on their feet. Focusing on Skechers cutting-edge attitude and street-wise image, the company utilizes an aggressive marketing approach that uses multiple mediums for maximum effectiveness. This integrated approach is based on advertising and supported by alternative direct mediums. Skechers places print advertising in up to 90 magazines a month including: Cosmopolitan, In Style, People, Vogue, GQ, Maxim, Us Weekly, Mens Fitness, Rolling Stone, Teen People, and Sports Illustrated. Skechers places broadcast advertising on ABC, CBS, NBC, FOX, MTV, WB, ESPN, and Nickelodeon.

FAST FACTS: About Skechers U.S.A., Inc.

Ownership: Skechers U.S.A., Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker Symbol: SKX

Officers: Robert Greenberg, Chmn. and CEO, 60, 1999 base salary $289,000; David Weinberg, CFO, 49, 1999 base salary $421,000; Jeff Greenberg, Dir. of Marketing; Clay Irving, Dir. of Management Information Systems; Marcee Mackey, Dir. of Human Resources

Employees: 1,666

Chief Competitors: Skechers U.S.A., Inc. competes with other branded products within their product category as well as private label products sold by retailers. The company's utility footwear competes with such companies as The Timberland Company, Dr. Martens, Kenneth Cole Productions, Steven Madden, and Wolverine World Wide, Inc. The company's athletic shoes compete with footwear from such companies as Nike, Reebok International Ltd., Adidas-Salomon AG, and New Balance. Their children's shoes compete with brands offered by The Stride Rite Corporation.

Skechers uses the term "alternative direct" mediums to describe their in-store presence, their at-home presence, and their special promotions. In company stores, Skechers' signature look is consistent throughout the retail environment creating a lasting brand image for consumers. There are more than 80 Skechers stores in Los Angeles, Boston, San Francisco, and New York, including the high-traffic, high-tourist locations of Melrose Avenue, Universal CityWalk, and Third Street Promenade in Los Angeles and 34th Street and SoHo in New York. Skechers are available through 3,500 accounts representing 25,000 sales outlets in the United States alone. The company's catalog and the interactive Web site provide convenience and around-the-clock access for the at-home customer. These direct-to-consumer operations also allow those not near a company-owned store to experience the Skechers lifestyle, see the extensive product selection, and utilize a store finder that directs customers to the nearest locations for brand purchases. To further promote e-commerce, Skechers has signed a deal with America Online (AOL) that allows shoppers to directly access the Skechers Web site through [email protected], AOL's shopping destination. The company's promotion team gets their message across through various agreements with well-known brands who's images are compatible with the company. In summer 2000, Skechers teamed with McDonalds for a promotion that placed the Skechers name and picture of a shoe on drink cups and french fry boxes in more than 13,000 restaurants. The company also teamed with Wherehouse Music for a special in-store promotion.

CURRENT TRENDS

Each year presents new opportunities for Skechers to build on their brands' ever-increasing popularity. For the first time, the company had signed endorsement deals with major celebrities to tie-in the brand with recognizable faces. Starting with one of the biggest teen icons in the world, singer Britney Spears appeared in Skechers Sport ads in international teen, young women, and pop culture magazines. For 2002 the pop princess inked a three-year deal to represent signature Britney 4 Wheelers by Skechers, the company's new funky, techno-fashion roller skates. Balancing out the companies image, actors Matt Dillon and Rob Lowe can be seen in separate ad campaigns running in domestic and international men's and pop culture magazines. Capitalizing on the trend, in 2002 the company signed worldwide endorsement deals with L.A. Lakers star Rick Fox and award-winning actor Robert Downey, Jr.

Supplementing the print ads, Skechers picks up the pace with lively and memorable broadcast campaigns for men and women centered on Skechers Sport and bright energetic spots for Skechers Kids. The ads run on television and cable networks in the United States, Canada, Europe, and Asia.

CHRONOLOGY: Key Dates for Skechers U.S.A., Inc.

1992:

Greenberg establishes Skechers in Manhattan Beach, California, distributing Doc Martens and other footwear

1993:

Greenberg begins designing his own brand of street-wise shoes for young fashion-conscious men

1995:

Skechers signs licensing deal with Signal/American and Genova Inc. to make casual clothes for men and boys

1997:

The company expands into international markets, selling shoes in Europe and Asia

1999:

Skechers conducts its initial public offering, selling seven million shares for $11 a piece

1999:

Begins construction on two new stores: one in New York City and one in Universal City, California

2000:

Business Week places Skechers fifth on their "100 Best Small Companies" list

2001:

Opened flagship Skechers U.S.A. store in Tokyo, Japan

2001:

Skechers sales climb more than 40 percent and reach nearly $1 billion

PRODUCTS

Skechers product lines include Skechers Sport, Skechers Collection, Skechers USA, and Skechers Kids. Two new women's lines that premiered in 2001 are Somethin' Else from Skechers and Skechers by Michelle K. With more than 900 styles, Skechers offers a broad range of styles cutting across gender lines and age ranges. Started in 1998 Skechers Sport has become a vital part of the company's business. Their line is promoted by extensive domestic and international print and broadcast campaigns. Skechers Collection is a line of mens dressy casual shoes, sandals, and boots that takes the fashion-savvy guy from the office to a night on the town. Chosen to represent this stylish line are two actors who embody the Skechers attitude, Rob Lowe and Matt Dillon. Skechers USA is a line of men's and women's casual shoes that concentrates on comfort without sacrificing style. Easy-going and casual, the line appeals to a wide variety of customers. These shoes are more-than-basic black and brown shoes, boots, and sandals. Although children's feet are small, kids make a big impression at Skechers. From infants to toddlers to active boys and girls, Skechers wants to fill the shoes of a stylish new generation. The kid's line features unique fabrics and colorful upper treatments, as well as lighted footwear, SLights. Somethin' Else is designed with the trendy teen in mind, while Michelle K. is a designer line featuring the latest high-fashion looks.

GLOBAL PRESENCE

To achieve brand expansion, Skechers has taken a comprehensive international approach to all aspects of their business. Skechers' international business has grown 75 percent over the past year and reached $100 million at year's end 2001. Boldly moving into the European marketplace, Skechers is seizing opportunity for growth potential, and the company now handles marketing and merchandising in France and distribution, marketing, and merchandising in Germany, Switzerland, and the United Kingdom. In 2001 the company opened European flagship stores in London, Dusseldorf, and Tokyo. In Japan Skechers' business has nearly doubled in the past year and is a key market in their international growth scheme. Skechers sees vast potential for increased sales considering the tremendous populations of Japan, Asia, and the Pacific Rim. To accommodate this expansion, the company incorporated Skechers S.a.r.l., a Swiss company that now runs international sales, marketing, and operations. The company's foreign business is handled by 35 distributors who sell products in more than 100 countries worldwide. To support its global efforts, Skechers runs extensive print and broadcast ads. The company's goal is to grow their international business from 12 percent to 25 percent of their total sales by 2007.

THE BRITNEY EFFECT: FIT ME SKECHERS, ONE MORE TIME

Britney Spears has hip-hopped her way to footwear fame. Envious marketing executives the world over wondered how a manufacturer holding only 2 percent of the home market could attract such a musical mega-star as Britney Spears. So why hadn't Ms. Spears gone after industry giants like Nike or Reebok, who spend billions on advertising and sponsorship each year? According to Skechers, the answer is simple: Britney approached them. The singer had worn the trendy trainers for personal use and performances, resulting in her decision to become their first celebrity endorsee. Skechers believes that the Britney Spears print campaign was an important catalyst behind their international growth, which rose 50 percent in 2001, and had wall-to-wall customers at store openings clamoring for "the Britney shoe." CEO Robert Greenberg remarked, "It was natural to broaden her impact on the company's business to the United States and reach more consumers overseas through a new agreement promoting Britney Spears 4 Wheelers, Skechers hot, hip line of roller skates. We think the Britney Spears collection of 4 Wheelers will result in consumers worldwide requesting the 'Britney skate,' which we believe will fly off shelves as people roll out of the stores."

EMPLOYMENT

Skechers' corporate culture is a stimulating, energized, and creative environment that is reflected in their offices, stores, products, and ads. Skechers credits their success to their extended employee family, from the designers who create their signature products to the innovative marketing staff, the sales representatives who distribute the product to the sales staff at their retail stores who interact with customers daily, and provide valuable feedback. From their ocean-view corporate offices in Manhattan Beach, to the field as a sales rep, distributor, or visual merchandise associate, Skechers is a fun-filled and inspiring atmosphere for career development.

SOURCES OF INFORMATION

Bibliography

abel, katie. "skechers takes control in france." footwear news, 4 february 2002.

lenetz, dana. "skechers usa, saucony report disparate results." footwear news, 18 february 2002.

pitman, simon. "fit me trainers one more time: britney spears endorsement of skechers sports shoes is a major scoop." brand strategy, september 2001.

skechers home page, 2002. available at http://www.skechers.com.

"skechers u.s.a., inc." hoovers online, 2002. available at http://www.hoovers.com.

thompson, kelly. "green days: robert greenberg talks candidly about the pitfalls and triumphs of brand-building." footwear news, 17 december 2001.

For an annual report:

on the internet at: http://www.skechers.comor write: skechers, 228 manhattan beach blvd., manhattan beach, ca 90266

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. skechers u.s.a. inc.'s primary sics are:

3021 rubber and plastics footwear

5139 footwear

also investigate companies by their north american industry classification system codes, also known as naics codes. skechers u.s.a. inc.'s primary naics code is:

316211 rubber and plastics footwear manufacturing