Lifestyle, Teens Fuel Recovery - athletic shoe industry experiences economic growth - Brief Article - Statistical Data Included

Brandweek, Jan 8, 2001 by Hilary Cassidy

One of the few surprising bright spots on Wall Street, athletic footwear is bouncing back from several sluggish years as manufacturers' renewed focus on innovation and fashion has coincided with reduced retail space and missteps by apparel companies.

Leading the recovery are teens, particularly males, who were less than thrilled with the back-to-school offerings of specialty chains like Abercrombie & Fitch and American Eagle, finding the clothing too similar to what already was in their closets.

"The net result, versus the '99 season when kids spent all their back-to-school dollars on apparel before buying sneakers, is that this year kids made footwear their major fashion statement," said John Shanley, vp and senior research analyst at First Security Van Kasper. "They were buying two and three pairs per visit, whereas last year retailers were lucky to sell them one."

Shanley said he expects that strength to continue through spring, as the athletic shoe companies are offering a series of powerful product lines.

An executive at one national retailer concurred: "Vendors have woken up after a two- to three-year period of not providing anything exciting and recognized the need to do that."

Manufacturers are playing up the fashion and lifestyle aspects of their brands to compete against the likes of Prada and Ralph Lauren.

Fun, fashionable shoes like Nike's one-size-fits-all Presto, more about styling and comfort than performance, are seeing strong sell-throughs, as is Reebok's clean-looking Classic line. And l's slip-ons and Skechers' urban looks are also driving sales.

Accompanying the new lines are improved in-store merchandising and marketing that often target youths and stress lifestyle attributes. Reebok's new "Defy Convention" campaign presents the individuality of its athletes, while Adidas, looking to recover from its fall as a once-trendy label, has adopted the new brand position, "Forever Sport--From Competition to Lifestyle."

Wary of suffering the fate of Adidas, New Balance, which Shanley called "hot as a pistol," is one of the few companies refraining from marketing to the huge but fickle teen base.

"We'll make performance product and if young people want it, that's OK," said Paul Heffernan, vp-global marketing for New Balance.

Case in point: New Balance's successful 950, a $90, technical-looking, hybrid cross-training/running shoe exclusive to Foot Locker that is popular with young consumers. "But we're not doing it by design," Heffeman said.

The popularity of trail shoes, with the upper of a brown shoe and the guts of a white one, signals another growth phenomenon. For the first time in 20 years, the market is supporting simultaneous demand for brown shoes and athletic shoes, which Shanley attributed to shared styling and technological innovations between the two categories.

For the sports participant, insiders predict running will be solid this year while basketball is readying a rebound. While athlete endorsements are less significant, Nike has enlisted Vince Carter and Gary Payton to help launch its $150 Shox basketball shoe; Adidas uses Kobe Bryant with his signature sneaker.

Meanwhile, in the last 18 months, the market lost 11% of its total square footage, due to store closings and reduced shelf space at J.C. Penney and Sears.

Some companies are using the recent sales surge to fuel higher marketing budgets. Reebok, already planning to double its ad spend for 2001, is well-positioned for a consumer push, and New Balance also had plans to increase spending from 2000 (see related item in The Game, page 8). And 1 is upping its ad budget as well, but Nike is sitting tight, sticking to its budget for the fiscal year, which ends in May.