L.A. Gear’s Earnings Fall 36% Despite Rise in Sales

Sneaker maker L.A. Gear, disclosing its most disappointing earnings since becoming a public company in 1986, said Wednesday that its second-quarter profit fell 36% despite a 33% increase in sales.

The Marina del Rey-based company warned investors June 1 that its earnings would be off as much as 40% for the quarter ended May 31, so the official report was perhaps not as bad as some expected. In fact, the company’s stock--which nose dived after the earnings projection was released four weeks ago--climbed $1.125 to close at $27.25.

As recently as last month L.A. Gear’s stock, the biggest gainer on the New York Stock Exchange last year, hit a record high of $50.375.

During the second quarter, L.A. Gear posted earnings of $10.2 million on sales of $225.4 million. The company, the nation’s No. 3 sneaker firm, has said its profit margins were squeezed as a bigger share of its sales came from overseas and from its lower-priced sneakers, which yield lower profit margins.

At the company’s annual shareholders meeting Wednesday afternoon, L.A. Gear officials minimized the importance of the second-quarter results, saying the period is usually the weakest for the sneaker business. The company predicted that its profit margins would pick up in the third and fourth quarters, benefiting from its new Michael Jackson line of shoes.

During the meeting, the company came under criticism from shareholders for, among other things, the $5-million-plus salaries of its two top executives and what was characterized as the vagueness of its advertising campaign. However, most of the more than 200 shareholders in a packed meeting room at the Doubletree Hotel in Marina Del Rey appeared to strongly back management.

The audience broke into applause when one investor, in defense of the salaries and bonuses paid to Chairman Robert Y. Greenberg and Executive Vice President Sandy Saemann, said the two “are a bargain at that price.”