Advertisement
YOU ARE HERE: LAT HomeCollections

REEBOK SPRINTING TO THE LEAD : Field of Eager Competitors

August 03, 1986|MARTHA GROVES | Times Staff Writer

Soon after Trace Tyrell transferred to La Canada High School last year, somebody broke into her locker and stole her gym clothes and sneakers. She later found the clothes in a crumpled heap, but the white Reebok aerobics shoes were gone.

"I bought another pair because I liked 'em so much," the 15-year-old said. In addition to Reeboks making great sports shoes, she said, "you can wear an outfit and they'll make it look better."

Four years after bouncing onto the U.S. scene with the first aerobics shoe, Reebok International has raced to the head of the athletic footwear pack with its stylish, soft-leather products.

Rock star Mick Jagger wore Reeboks in his "Dancin' in the Street" video. Cybill Shepherd enlivened last September's Emmy Awards by sporting a pair of orange fluorescent Reebok high-tops with her strapless black velvet evening gown.

Across America this year, upscale adults and teens in the let's-get-physical set will buy an estimated 36 million pairs of Reeboks--in a rainbow of colors priced at $35 to $65--for aerobics, tennis, basketball and just plain casual wear.

"It's not often that a shoe becomes part of a culture," one observer said. "In this case, it actually did."

From a standing start, sales and earnings of Reebok--named for an African gazelle--have sprinted ahead at an astounding rate. In 1986, analysts expect Reebok's total sales to hit $800 million, including apparel.

Its U.S. athletic footwear sales will move past those of Nike, the industry leader, and capture nearly 30% of the $4-billion market, analysts say. Net income has also been impressive, reaching $2.72 a share in 1985, up from 47 cents the year before and a scant 5 cents in 1983.

A year ago, Reebok International made an initial public stock offering of 4 million common shares at $17 on the over-the-counter market. On April 15, an additional 2.2 million shares were sold at $49; the shares then topped $80 in May before a 3-for-1 split on June 9.

Since then, the stock has yawed between $25 and $35, reflecting a battle of wills. Bullish investors argue that the company will continue to grow by expanding into new products or making acquisitions, whereas the bears are dubious that the company can long maintain its spectacular growth levels once the popularity of aerobics, Reebok's most important segment, fades.

While acknowledging that the company has sailed over competitive hurdles to date, critics say Reebok might be headed for a fall. They note that a field of competitors is eager to win over American consumers, a notoriously fickle lot.

"Ultimately, it's only a sneaker," said Jack A. Sullivan, a senior vice president at Van Kasper & Co., a San Francisco brokerage, who has been advising investors to sell the stock. "The only cautionary aspect is the fact that at this stage it's fashion, and fashions change."

Come what may, Reebok has assured itself a spot in sports lore. The company's roots are in Bolton, England, where in 1895 Joseph William Foster started making spiked shoes by hand for runners. With his sons, he formed J. W. Foster & Sons, which sewed shoes for the 1924 British Olympic track team that was popularized in the 1981 film "Chariots of Fire."

In 1958, two of the founder's grandsons started a company called Reebok, which eventually absorbed the original firm.

Twenty-one years later, Paul Fireman, whose grandfather had been in the shoe business, was scouting the aisles of the National Sporting Goods show in Chicago and spotted Reebok International's display. Fireman spent six months persuading the family to let him distribute the shoes in the United States.

Within five years, Reebok U.S.A. had bought out the British company. (Remnants of the British heritage remain, such as the tiny Union Jack on shoes.)

According to a recent Standard & Poor's report, Pentland Industries, a British company, owns about 37% of the 17.5 million outstanding shares, while Fireman, now chairman, president and chief executive, and his wife, Phyllis, own nearly 21%.

Reebok has headquarters in Avon, Mass., where a rapidly growing work force--which has risen tenfold to 750 in two years--churns out designs and marketing plans for an array of products. Realizing the need to broaden its base, the company recently raised its advertising budget and entered new segments of the market. It also has opened a Los Angeles office to keep closer tabs on West Coast trends.

So what makes Reebok run?

"What Reebok has been able to do is align itself with what the consumer wants," Fireman said last week in a telephone interview. "All marketing, design and production are directed toward answering the requests, needs and fantasies (of customers) versus us trying to tell the consumers what they want."

This approach worked well when the company entered the aerobics field. Instead of relying on high-priced endorsements by sports stars, Reebok courted aerobics instructors, figuring--rightly--that students would follow their leaders.

Advertisement
Los Angeles Times Articles
|
|
|