Sneaker Maker Had--Till Now--Bounced Back
Until the announcement Wednesday that it will soon close its manufacturing plant in Orange, Vans Inc. had been an anomaly in the U.S. sneaker industry.
In a trend-driven industry, Vans largely clung to a shoe design that was two decades old. And the company manufactured in the United States, even though virtually all of its rivals had shifted production overseas.
Despite ups and downs, the strategy mostly worked.
In 1982, the company, then known as Van Doren Rubber Co., got a big boost when its black-and-white checkered shoes were featured in the popular movie “Fast Times at Ridgemont High.”
The company geared up for more production, but the fad passed and the sneaker maker quickly fell into bankruptcy. Private investors pulled the company out of bankruptcy and took over in 1988, and earnings rose. But the company continued to have problems.
In more recent years, Vans was helped by a booming market for athletic footwear. In its fiscal year ended May, 1992, the company’s profit peaked at $6.5 million.
But since then, Vans’ fortunes have soured, and it has faced mounting pressure on several fronts.
The U.S. athletic footwear market, which grew throughout much of the 1980s at an average annual rate of 15%, flattened out in the early 1990s. And adding to Vans’ misery was California’s recession.
The Teamsters Union was pounding at its door, trying to organize workers in Orange. And Vans was facing increased scrutiny by immigration officials who were cracking down on illegal workers.
Teamsters officials contended Wednesday that Vans was closing the plant to skirt the union’s organizing effort. The union had lost an election last year, but after charges were filed of illegal anti-union activities by the company, a second union vote was scheduled for late June.
Company officials, though, dismissed that motive, pointing instead to another reason for the shutdown.
“The image of the company has changed,” said a Vans executive who requested anonymity. “People are looking for new things, and they’re taking to international shoes. The basic, traditional Vans shoes aren’t as popular as in the past.”
About a year ago, Vans, trying to put more emphasis on fashion, turned to South Korea to produce a new line of shoes. Vans called it its international collection, and it was designed for teen-age boys and others who are skateboarders or who possess a “skater attitude,” according to company reports.
Sales of those shoes have taken off, boosting revenue by 10%, to $63.5 million, in the nine-month period ended Feb. 25. Earnings more than tripled in that period, to $1.8 million, compared with a year earlier.
But that would come at the expense of the workers in Orange. As sales of the Korean-made shoes increased, production requirements in Orange dissipated. Since early this year, Vans has laid off several hundred workers in Orange.
Walter E. Schoenfeld, Vans’ president and chief executive officer, said that Vans footwear made overseas now accounts for 70% to 75% of sales. And these shoes, he said, cannot be made at the Orange plant without heavy costs and limitations.
Vans says workers at the Orange plant assemble the various parts, and the shoes are then essentially baked in an oven. But in South Korea, the shoes are not heated but are bonded with adhesives and solvents, and this process gives the shoes a slightly different look--and one that is popular today.
Vans could make its international collection in Orange, but officials say the company would have to pay a surcharge and face other limits because of environmental regulations in Southern California.
Rather than pay the extra costs and have its hands tied, Vans decided it would be more prudent to shift production overseas.
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The Vans Trend
Vans Inc., beset by declining sales and labor problems, is closing its Orange County plant at the end of July. Though the company continued to increase sales domestically, dollar volume abroad declined 51% between 1992 and 1994. In the same period, net income declined nearly 80%. Vans’ economic trends, with all figures in millions:
Total Sales 1994: $80.5
Net Income 1994: $1.4
Vans Inc. at a Glance * Business: Shoe manufacturer * Headquarters: Orange * Founded: 1966 * Manufacturing employees: 1,350 in Orange and Vista * Products: 30 models of multicolored suede and canvas sneakers * Retail outlets: 79 * 1994 net earnings: $1.4 million
At Home and Abroad
FOREIGN SALES DOMESTIC SALES 1990 $17.0 $37.4 1991 22.5 47.8 1992 28.5 62.7 1993 21.8 64.8 1994 13.9 66.6
Source: Vans Inc.; Researched by JANICE L. JONES / Los Angeles Times
