Oakley Turns Its Eyes to the Athletic Footwear Market

On the same day that Nike Chairman Philip Knight was telling the National Press Club that it’s impossible to turn a profit from producing shoes in the U.S., would-be footwear competitor Oakley Inc. was wooing Wall Street with a promise to do just that.

Oakley, which spent most of 1997 dealing with a sales slowdown in its upscale sunglasses business, this week unveiled the line of $125 athletic shoes that mark its entry into the fiercely competitive $8.2-billion athletic footwear market now dominated by Nike.

During a daylong meeting with security analysts at Oakley’s headquarters in southern Orange County on Tuesday, Oakley founder and Chairman Jim Jannard described the shoes as a functional yet stylish alternative for younger consumers who take their apparel and footwear cues from surfers, motocross riders and participants in other alternative sports.

Oakley won’t say how many pairs of the distinctive shoes it projects manufacturing when its production line in Foothill Ranch opens on June 22. But Jannard maintained that the shoe line will turn a profit because of Oakley’s blend of proprietary technology and materials.

The sales pitch Jannard delivered to industry analysts was in decided contrast to the message Knight was delivering in Washington, D.C., in a speech that covered Nike’s recent efforts to ensure proper working conditions and pay rates for 500,000 factory workers overseas who assemble Nike shoes and apparel.

Arguing that shoe manufacturing is an inherently labor-intensive process, Knight maintained that high-volume manufacturers can’t keep prices affordable using domestic plants. Nike closed its only two U.S. plants in 1984, when it transferred production to Asian countries with lower labor rates.

Knight said domestic production won’t be feasible until manufacturers perfect new technology and materials not yet on the horizon--or unless legislators use tariffs to boost the cost of foreign goods.

“Our studies show that the average cost to retailers for a pair of Nikes would go up by $100,” Knight said. “That means the average retail price, which is $70 to $75, would go up to $170 or $175.” And, Knight said, the price for a pair of already pricey Air Jordan shoes would jump to $250 from $150.

Jannard, though, bluntly maintains that the shoe industry has failed to keep pace with modern manufacturing processes.

Labor-intensive shoe factories, Jannard said, “are much the same approach as the Pyramids. You throw enough bodies at it and you’ll be able to move those stones.”

Oakley’s 75,000 square-foot shoe manufacturing facility inside its Foothill Ranch plant incorporates computer-aided design terminals, a pair of injection molding machines to turn out oversized soles, and a room where manual and automated stitching is completed.

Oakley won’t try to go toe-to-toe with Nike in athletic shoe stores. It will instead restrict sales to the Internet and about 200 retailers that cater to participants in alternative sports such as surfing and snowboarding.

Most observers agree there’s room for Oakley to become a niche player in athletic shoes.