Soon after Trace Tyrell transferred to La Canada High School last year, somebody broke into her locker and stole her gym clothes and sneakers. She later found the clothes in a crumpled heap, but the white Reebok aerobics shoes were gone.
"I bought another pair because I liked 'em so much," the 15-year-old said. In addition to Reeboks making great sports shoes, she said, "you can wear an outfit and they'll make it look better."
Four years after bouncing onto the U.S. scene with the first aerobics shoe, Reebok International has raced to the head of the athletic footwear pack with its stylish, soft-leather products.
Rock star Mick Jagger wore Reeboks in his "Dancin' in the Street" video. Cybill Shepherd enlivened last September's Emmy Awards by sporting a pair of orange fluorescent Reebok high-tops with her strapless black velvet evening gown.
Across America this year, upscale adults and teens in the let's-get-physical set will buy an estimated 36 million pairs of Reeboks--in a rainbow of colors priced at $35 to $65--for aerobics, tennis, basketball and just plain casual wear.
"It's not often that a shoe becomes part of a culture," one observer said. "In this case, it actually did."
From a standing start, sales and earnings of Reebok--named for an African gazelle--have sprinted ahead at an astounding rate. In 1986, analysts expect Reebok's total sales to hit $800 million, including apparel.
Its U.S. athletic footwear sales will move past those of Nike, the industry leader, and capture nearly 30% of the $4-billion market, analysts say. Net income has also been impressive, reaching $2.72 a share in 1985, up from 47 cents the year before and a scant 5 cents in 1983.
A year ago, Reebok International made an initial public stock offering of 4 million common shares at $17 on the over-the-counter market. On April 15, an additional 2.2 million shares were sold at $49; the shares then topped $80 in May before a 3-for-1 split on June 9.
Since then, the stock has yawed between $25 and $35, reflecting a battle of wills. Bullish investors argue that the company will continue to grow by expanding into new products or making acquisitions, whereas the bears are dubious that the company can long maintain its spectacular growth levels once the popularity of aerobics, Reebok's most important segment, fades.
While acknowledging that the company has sailed over competitive hurdles to date, critics say Reebok might be headed for a fall. They note that a field of competitors is eager to win over American consumers, a notoriously fickle lot.
"Ultimately, it's only a sneaker," said Jack A. Sullivan, a senior vice president at Van Kasper & Co., a San Francisco brokerage, who has been advising investors to sell the stock. "The only cautionary aspect is the fact that at this stage it's fashion, and fashions change."
Come what may, Reebok has assured itself a spot in sports lore. The company's roots are in Bolton, England, where in 1895 Joseph William Foster started making spiked shoes by hand for runners. With his sons, he formed J. W. Foster & Sons, which sewed shoes for the 1924 British Olympic track team that was popularized in the 1981 film "Chariots of Fire."
In 1958, two of the founder's grandsons started a company called Reebok, which eventually absorbed the original firm.
Twenty-one years later, Paul Fireman, whose grandfather had been in the shoe business, was scouting the aisles of the National Sporting Goods show in Chicago and spotted Reebok International's display. Fireman spent six months persuading the family to let him distribute the shoes in the United States.
Within five years, Reebok U.S.A. had bought out the British company. (Remnants of the British heritage remain, such as the tiny Union Jack on shoes.)
According to a recent Standard & Poor's report, Pentland Industries, a British company, owns about 37% of the 17.5 million outstanding shares, while Fireman, now chairman, president and chief executive, and his wife, Phyllis, own nearly 21%.
Reebok has headquarters in Avon, Mass., where a rapidly growing work force--which has risen tenfold to 750 in two years--churns out designs and marketing plans for an array of products. Realizing the need to broaden its base, the company recently raised its advertising budget and entered new segments of the market. It also has opened a Los Angeles office to keep closer tabs on West Coast trends.
So what makes Reebok run?
"What Reebok has been able to do is align itself with what the consumer wants," Fireman said last week in a telephone interview. "All marketing, design and production are directed toward answering the requests, needs and fantasies (of customers) versus us trying to tell the consumers what they want."
This approach worked well when the company entered the aerobics field. Instead of relying on high-priced endorsements by sports stars, Reebok courted aerobics instructors, figuring--rightly--that students would follow their leaders.
(In basketball and tennis, Reebok has adopted the endorsement approach to make a more convincing argument for the shoes' capabilities. Sadly, it signed Len Bias, the Boston Celtics' top draft pick, shortly before his drug-related death. "We go for only top-quality, elitist-type athletes," Fireman said. "The circumstances were unfortunate.")
Lately, Fireman has had to deal with reports of higher returns and cancellations and heavy discounting by retailers. Last month, at a Wall Street analysts meeting, he unleashed what one observer called "the nuclear backlog weapon"--telling the investment advisers that the company's backlog of orders through October exceeds $400 million, compared to $120 million a year ago. Contrary to reports about discounting and returns, he said at the meeting, "just the opposite is true."
In the interview, however, he acknowledged that there have been problems with the aerobics shoes' soft-leather uppers tearing away from the soles. He said the company's factories--most of them in South Korea and Taiwan--have corrected the situation.
Florence Kawoczka of Johnson Redbook Service, a New York firm that follows apparel companies, said the company's mood is upbeat. "I don't expect them to fall flat on their face after the fashion interest (in shoes) dies," she said. "I think there's enough to grow on." She anticipates 20% increases in sales and earnings over the next two years, despite an inevitable decline in the company's admirable profit margins.
Brenda Gall, a vice president at Merrill Lynch in New York, is also bullish--for the next quarter or two. Beyond that, she won't hazard a guess. "I think they're a very opportunistic management in a good sense of the word--looking for opportunities," she said. "I think they're on top of what's going on in the market. This is their first year in basketball, and they're expecting to do $75 million--that's remarkable."
Bid Was Rebuffed
One recent opportunity may have passed them by. In June, Reebok made a bid valued at about $277 million for Stride Rite Corp., a Cambridge, Mass., shoemaker and retailer, but was rebuffed.
The company, which makes Sperry Topsiders, children's shoes and work shoes, would have been "an absolutely fantastic fit," said John Horan, a Yardley, Pa., publisher of a financial newsletter called Sports Ink. Given that Reebok has more than $100 million in the kitty, he added, there's "certainly speculation that the deal isn't dead."
Fireman said that Reebok has no current plans "to revisit" the Stride Rite acquisition but that "we have an appetite to absorb a very significant size company if it's worthwhile." Horan believes that Wolverine--a Rockford, Mich., company that owns Hush Puppies as well as Brooks and Kaepa athletic shoes--might be a good second choice.
As far as retailers are concerned, Reebok is still a winner. Area stores say Reebok's basketball, running and tennis shoes are selling well, and they expect the company's brand-new Weebok line of infant shoes to be popular.
For spring, 1987, Reebok will ship shoes for fitness walking, a form of exercise that is gentler than jogging on the joints of aging yuppies. Shoe companies, led by Nike and Rockport, are betting that walking will provide a strong new product niche.
(Reebok's entry into the apparel area has been far less successful, but Fireman said the company is improving the quality--and raising the prices.)
Reebok is still the top seller at the 470-store Athlete's Foot chain nationwide, said David Quilici, regional merchandise manager in Santa Clara, Calif. Ditto at Frontrunners in Brentwood, where Reebok's aerobics success has carried over into running and tennis, according to manager Mary Noonan.
Retailers Run Short
Both, however, complain that the company doesn't supply shoes fast enough. "We're out of Reeboks right now," Quilici said. "When it's the only shoe in town that anybody wants--like when they made the only white high-top--it was a serious problem," Noonan said. "They're the absolute worst offender."
Fireman acknowledges that the company has "more orders in house than we'll probably be able to ship" through October. Although he realizes that frustrated retailers might build a backlash against Reebok, he also sees a benefit: "The lack of product keeps the bloom on the rose a while longer."
This aura might delay for a time what Wally Smith, president of Seattle-based Recreational Equipment Inc., views as the culmination of an inevitable cycle: "Who's Reebok? Get me Reeboks. Get me a Reebok type. Who's Reebok?" Smith said Reebok's supply problems will solve themselves at REI stores as competitors siphon off customers.
(Even Garry Trudeau, in a Doonesbury cartoon strip last February, referred to Reebok as "last year's hot shoe.")
Reebok's success has been "a real eye opener" for Nike Inc., the Beaverton, Ore., company that led the running-shoe pack a few years back, according to Horan, the Sports Ink publisher.
For years, Nike lived up to its name--the winged Greek goddess of victory--by zooming past everybody in the U.S. market. It was always able to beat back competitors such as New Balance--until Reebok came along, that is.
Nike rebounded last year with strong sales of its Air Jordan basketball shoe, named for Michael Jordan of the Chicago Bulls. This year, however, the line's popularity has dropped sharply, and the company's orders through November are down 29%, compared to last year.
Nike Expanding Line
Nike, too, is expanding its product line, with an emphasis on the shoes' performance. Among its offerings is the Sock Trainer, a strange-looking, lightweight running shoe without laces or the distinctive "swoosh" logo.
"We see ourselves as a sports company," Nike spokesman Kevin Brown said. "We're not entirely sure that all our competitors primarily see themselves as sports companies."
One able competitor is Avia Athletic Footwear in Portland, Ore. The company, which last week delayed a long-awaited public offering to hold out for a more favorable investment climate, is widely viewed by analysts and shoe wearers as another Reebok International. Its shoes have a concave sole that creates a trampoline effect and helps absorb shock.
Avia (pronounced a-VEE-uh) is "a real comer," Horan said. "It's coming in and doing the same thing to Reebok that Reebok did" to competitors.
Noonan of Frontrunners reports that Avias are definitely gaining on Reeboks. A grass-roots sampling bears that out. Of 19 regulars at a Westside women's health club one recent morning, seven, including the instructor, worked out in Reeboks. Eight wore Avias.
And at La Canada High, fashion seems to be coming full circle. Tyrell's girlfriends are getting back to basics--$10 sneakers by Kinney called Kapers.