Sales of Reebok's fashionable sneakers still run at sprinter's pace
| Canton, Mass.
REEBOK INTERNATIONAL LTD., which has taken the US athletic shoe industry by the toes and given it a shake, continues to confound the naysayers on Wall Street. Short-sellers of Reebok stock thought it would drop like a rock when the aerobic fitness craze slowed and the soft, white leather shoe fad faded. But though growth of exercise classes may be lagging, Reebok sales remain good and the stock has not taken a nose dive.
Instead, the Canton, Mass., company is still selling millions of its comfy atheltic shoes to a broadening base of customers - and continues to ride a wave of public attention most shoe companies only dream about.
Famous people who can afford to wear anything they choose still get caught in front of the cameras wearing the bright, often multi-hued Reebok sneakers. Mick Jagger of the Rolling Stones wore his Reeboks in a rock video, and actress Cybill Shepherd sported her florescent orange sneakers at an Emmy Awards ceremony. Bruce Springsteen and Lionel Ritchie have been wearing Reeboks around town, too.
But the real secret of success for the fast-growing company isn't its appeal to the stars -- but its ability to make shoes that please people like Ronald G. Down.
Mr. Down isn't an artist, entertainer, comedian, or celebrity. He is a Boston firefighter.
Not infrequently, Down works a 24-hour shift in the fire house during which he refuses to wear any other shoe than his white, hightop Reebok sneakers -- because they're so comfortable. Even though black shoes are officially required around the firehouse, Down sports his soft, comfortable whities anyway.
``By regulation I do have to change into rubber boots before we get a call,'' Down says. ``Other than that, I wear them all the time. I'm a part-time roofer and I wear them on the roof, too.''
That kind of dedication to a pair of shoes surprises some people, but not James Barclay, president of Reebok's footwear division.
``One thing our brand really stands for, besides performance and style, is comfort,'' Mr. Barclay said in a recent Monitor interview. ``We don't believe comfort is a fad. We don't think comfort ever goes out of style. There's nothing that says you can't make performance shoes both fashionable and comfortable.''
Together, Barclay and Reebok president and chief executive officer Paul Fireman have charted a course for Reebok that has helped it grow from $900,000 in sales in 1980 into a major shoe company with $919 million in sales last year. Some shoe industry analysts expect Reebok sales this year to be in the neighborhood of $1.3 billion. Mr. Fireman was recently listed by Business Week magazine as the nation's second highest paid chief executive, with more than $13 million in compensation last year.
From the beginning, the Reebok story has been one of smart marketing. The company began as a glimmer in Fireman's eye when he spotted the Reebok shoe at a trade show in 1979. Something about the mystique of the famous British running shoe stuck in Fireman's mind.
At that time, only a few of the elite, hand-stitched runners' shoes were being made by Britain's family-owned J.W. Foster & Sons. But before long, Fireman had negotiated the exclusive right to sell Reebok shoes in North America.
Still, all was not roses. Initial attempts to sell a high-priced Reebok running shoe in the United States failed. Later, Reebok was reorganized and Pentland Industries PLC, a British shoe distributor, bought a large minority stake and began helping the company distribute shoes outside the US.
Reebok hit the big time with a woman's shoe for aerobics exercise classes. Instructors liked its look and feel - which was a bit like a ballet slipper but had a gripping sole. It didn't take long for those following the aerobic leaders to begin bouncing and bobbing to music wearing the same soles.
Despite lingering doubts attached to the faddish aspect of some of Reebok's business, securities analysts concede Reebok management is remarkably adept at discerning consumer desires and capitalizing on them.
``They've proven they are very powerful marketers,'' says Matthew Reich, a shoe industry analyst with Drexel Burnham Lambert. ``They provide the consumer with what they want.''
Says Jack A. Sullivan, a senior vice-president of Van Kasper & Co., a San Francisco brokerage firm: ``It's a brilliantly run company, but they are not sanguine about staying in place. They can't be. These [huge successes] are things that will go away - at least the intensity of the success will pass because what you're talking about, more than anything else, is fashion.''
But to make sure Reebok thrives beyond fad or fashion, the company has been diversifying. Although its line of fashion apparel wasn't a big success, the company bought Rockport shoes for $118 million last November and recently started a line of brown leather walking shoes. Arch-rival Avia, whose shoes were stealing away Reebok followers, was purchased by Reebok last November for about $180 million. There was a failed attempt to buy Stride-Rite, the children's shoemaker. Now, Reebok has an eye on the Frye Company, a Marlboro, Mass., bootmaker.
Reebok also is looking overseas, with factories in Taiwan and South Korean cranking out shoes for Europe, Britain, Japan, and the Pacific Rim. Sales abroad make up about 10 percent of revenues.
But as Reebok moved into making running and court shoes, it encountered some problems. Reebok may have ``a little bit of an image problem'' among some amateur sports enthusiasts, says Michael Kennedy, owner-manager of City Sports, a Boston sporting goods store. ``It isn't a spectacular performance shoe,'' he says. ``It's not known to last a long time or be tremendously supportive.''
When sales of the shoe first took off, Mr. Kennedy says his store was getting 30 pairs a month returned because they ``blew out,'' or tore apart during heavy athletic use. Because of that, he thinks some people might not buy another pair. Despite that problem, the name ``Reebok was magic'' in 1986, says Kennedy. He cites as proof the flood of people coming into his store at that time ``saying `give me Reebok' without knowing anything about them.''
Now, supply has caught up with demand and the torrid pace of sales has slowed a bit. But Reebok is still one of two solid sellers in the store.
``I think the company has realized the problems, and they've been making the shoes stronger and more supportive,'' Kennedy says.
Having corrected much of the durability problem, analysts say the company now has such momentum it will continue to be a major player in the industry.
``Reebok management has open ears to the consumer,'' says Drexel's Mr. Reich. ``They're the ones providing the fashion-oriented product, the comfort - they've given the consumers what they really want and that's what's driving sales.''