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Sketchers: From Michael Jackson to California Chrome

6/2/2014
By Charles Payne

Lessons on Reinvention and Redemption

Not only did Sketchers (SKX) post its best quarter ever, earlier this year, they did it in only a couple years after paying out a giant settlement for false advertising.

Robert Greenberg was a former hairdresser and wig salesman who began selling shoelaces at Venice Beach, California.

In 1979, Greenberg started a company called LA Gear to reflect the hip culture of the city. With an aggressive marketing campaign aimed at large upscale department stores, the company took off. His company went public in 1986 and its shares doubled on the first day of trading.

Its marketing was an eclectic blend, which featured Belinda Carlisle and Joe Montana, but the company made a giant splash with a record contract for Michael Jackson to serve as its spokesperson. However, the decidedly un- cool hip grunge movement and greater competition replaced cool hipness.

Greenberg hit the finish line, and was out by 1991.

If you ain't cheating, you ain't trying

Act II for Greenberg began in 1992, when he joined forces with his son, Michael, and distributor for Doc Marten to sell boots and skate shoes for a company they named “Sketchers”.

Doc Marten sued the company right out of the gate for importing knockoffs of its boots.

In 2010, the company took a page from TOMS, began selling BOBS, and gave to charity each time a pair of shoes was sold. Their version never took off, as many felt management was disingenuous.

The company continued to morph until it became a real player in the sneaker wars with a product, which worked out your legs, even as you were simply standing still. The "Shape-Ups" were a hit- who would not want to have toned legs just from standing? Well, as it turns out, the marketing for the shoe was just a little too enthusiastic. How enthusiastic you might ask?

In 2012, the company was ordered by the FTC to pay a civil fine of $40 million dollars. However, here we are the week after the company's newest spokesperson, Meb Keflezighi, won the Boston Marathon, looking at mind-boggling results. Concern was that the quarter did not include Easter, and had to deal with the polar vortex, which isn’t unlike any other retail play, and thus was expected to miss this earnings period. Management might actually be ahead of the curve this time. It was focused on minimalist runners and men's relax fit. The former for people inclined to run barefoot, but needing some protection, and the latter for the old dudes that appreciated that their feet felt slimmer in the shoes.

Some things have not changed, including an eclectic roster of endorsers.

  • Brooke Burke
  • Mark Cuban
  • Danielle Bradbery
  • Tommy Lasorda
  • Joe Montana (who worked wonders for LA Gear)

Talk about reinvention. Now management is bragging about demand around the world. If you have made miscues in your life and think all hope is gone, check out the former hairdresser and the salesman son.

All Bets Are On Chrome…

As of this morning, Sketchers announced their latest endorser…and he isn’t even human. The owners of California Chrome, a race horse, have signed the first major sponsorship deal for the horse ahead of his race in the Belmont Stakes to become the first Triple Crown winner in 36 years. There’s no way Sketchers would pass up the opportunity to have its name plastered all over the horse’s handlers, his owners’ feet, and riding gear. Robert Greenberg noted that "We're spending a couple bucks to roll the dice, and if this horse wins it all, we'll be part of it." Ultimately, the company’s goal is to go after the older consumer, since the average horse-racing spectator tends to be between the ages of 50-60 years. In addition, it is retired athletes who advocate wearing Sketchers shoes over Nike (Joe Montana, Joe Namath, etc.).

It’s quite the marketing bet, but isn’t that what horseracing is all about? No matter the outcome at the Belmont, all of the hype surrounding California Chrome, leading up to the race, is sure to be a win-win for Sketchers and Greenberg.

Charles Payne
Wall Street Strategies


 

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