Taking Deep Breath, Skechers Puts Best Foot Forward Again
Skechers USA Inc., the Manhattan Beach-based maker of trendy shoes and clothing, is back with its $115-million first-time stock offering again, after pulling the deal last year because of market conditions.
While the company may have great timing when it comes to introducing its casual footwear for teens and twentysomethings, analysts say Skechers may have picked another bad time for its stock offering.
“With the deluge of ‘dot-com’ deals this spring, this is now a volatile time, and not the time to be going out with any IPO--Internet or otherwise,” said Gail Bronson, analyst with Calabasas-based data firm IPO Monitor.
Popular with Gen-Xers and baby boomer professionals alike, Skechers is riding the active-wear “brown shoe” trend it helped create. Skechers says it designs shoes “with the active, youthful lifestyle of the 12-to-25-year-old age group in mind.” It’s known for sneakers with chunky soles, sandals and its logger boots.
David Menlow, president of IPO Financial Network in New Jersey, said that while Skechers is a profitable company with a well-known brand, last year’s shelving of the IPO may haunt the deal when it comes this month.
“This product is very fresh. The company is doing well. The gains are there. The growth is good. But the sizzle isn’t there,” Menlow said. “The deal has been around too long. Investors don’t want to buy something old--they want something smooth and crisp.”
Expected to be priced this week through an investment banking team led by BT Alex. Brown & Sons, the initial public offering had originally been planned for last October. Skechers will trade on the New York Stock Exchange under the symbol SKX.
Money from the stock sale is earmarked for new store openings, hiring and product expansion, Skechers said. The company now has more than 30 stores, including one in New York’s Times Square.
Skechers Chairman Robert Greenberg co-founded the shoemaker in 1992 with his son Michael.
Robert Greenberg helped start another trendy shoemaker, Santa Monica-based L.A. Gear, in 1979. He bought out his partner in 1986 when the company went public, but he left in 1992 amid financial losses and sagging sales, due in large part to the California recession. L.A. Gear later received approval for its Chapter 11 bankruptcy reorganization plan, and its once-highflying stock became worthless.
Like L.A. Gear, Skechers is a family business. Michael, 35, is the company’s president and owns 10% of it. His father, who is also the chief executive, owns 65% of the company.
Three other sons--Jason, 28, Jeffrey, 30, and Scott, 38--are vice presidents.
Business at Skechers is strong. In its last fiscal year, sales surged to $372 million from $183 million the previous year, according to the company’s SEC filing. Profit also more than doubled, to $15 million, from $6.8 million the year before.
Still, as L.A. Gear’s troubles show, the cyclical business of retail--especially for shoemakers--can be dangerous. It is a trendy industry vulnerable to seasonal fluctuations and changing tastes. Even the $12-billion-a-year U.S. sneaker business has been hit hard recently as many companies switch from “white shoes,” or sneakers, to “brown shoes,” or active wear.
“The problem with these retailers is that it is so volatile,” said Tom Taulli, an IPO analyst in Newport Beach. “It’s all about taste and, if you fall out of favor, well, from an investment standpoint, it’s a tough one.”
However, Taulli pointed out that some IPOs from retailers have fared well recently, including Zainy Brainy, a Pennsylvania-based toys-and-books retailer whose shares were priced last week at $10 and rose a respectable 14% the first day. New York-based Wit Capital Group Inc., an online investment bank, soared 65% in its debut Friday. But the market remained rocky for less well-known names. DirectChef, a Culver City-based distributor of food service equipment via the Internet, catalogs and stores, postponed plans to sell 6.3 million shares at about $8 each, raising $50 million. Weak demand caused the company to cut the expected price twice from a range of $11 to $13 a share.
BancBoston Robertson Stephens, which is handling the sale, said the postponement is due to delays in obtaining permission from the Securities and Exchange Commission to proceed with the sale.
Bloomberg News was used in compiling this report.
Initial public offerings are highly speculative and unsuitable for many investors. *
Debora Vrana covers investment banking and the securities industry for The Times.
