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Airball for basketball shoes
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November 5, 1997: 4:42 p.m. ET
Converse, Fila latest to get beat by sagging basketball shoe sales
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NEW YORK (CNNfn) - Athletic footwear makers are finding it hard to win with their star player, basketball shoes, spending more and more time on the bench.
That was evident recently by the fate of Converse Inc. The North Reading, Mass.-based sports shoe maker had a solid game in the third quarter, posting earnings of $175,000, or 1 cent per share, after losing $3 million during the same period last year.
But analysts were looking for a better performance and Converse's stock (CVE) has paid the price, falling from 28 in the latest 12 months to 7-1/8 Wednesday.
Italian shoe company Fila (FLH) also scored lower in the third quarter. Its earnings fell to $17 million from $42 million during the third quarter of last year, the firm said Tuesday.
Its stock price has dropped from a 12-month high of 89-1/4 to 26-9/16 Wednesday.
Both companies cited a decline in sales of basketball shoes for their troubles. Converse's quarterly sales in that market were off more than 25 percent.
But that is not the only reason for Converse and Fila's woes. Just as important has been the competition from Adidas and Nike.
"If the domestic U.S. market is growing at about 4-5 percent and Nike has 12 percent sales growth and Adidas is showing 15-18 percent, that doesn't leave a whole lot of room for everybody else," said Peter Russ, a managing director at Laidlaw Global Securities.
Analysts blame a combination of oversupply and a surge in the so-called "brown shoe" market, which includes hiking shoes.
"They are taking big bites of market share out of the sneakers," said Kurt Barnard, president of Barnard's Retail Market Report. "The sneaker business is a mature business that represents primarily a replacement mode. People mainly buy sneakers when the old ones wear out."
Most shoe companies have taken a more full-court press approach to the market, pursuing other areas such as tennis and cross-training, as well as women's footwear.
However, Converse and Fila have built an offense mainly around basketball shoes and were vulnerable to changes in that market.
While Converse has shown more reluctance to get away from basketball too much, Fila said it was reorganizing some of its operations to reduce its dependence on that market.
But Fila may find it hard to pull back too much from basketball, especially after signing Detroit Pistons forward Grant Hill to an $80 million endorsement deal which will keep him on the Fila team for seven years.
-- by staff writer Randy Schultz
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