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L.A. GEAR OUT OF RYKA DEAL; WHERE DOES IT LEAVE BOTH?
Published May 1, 1995
L.A. Gear "walked away" from a proposed merger with women's shoe maker Ryka, "blaming the company's expected losses in the first two quarters of this year," according to the BOSTON GLOBE. Some analysts saw the move signaling "the beginning of the end of Ryka." Ryka Founder Sheri Poe, while "disappointed the merger didn't work," expressed "hope the company could be saved" by other parties. L.A. Gear had offered $16.4M in cash and stocks, but many workers at Ryka were "relieved the deal was off" as they didn't want to move to CA. In addition, Ryka "workers have become increasingly resentful toward Poe, whom they blame for poor management" (Tina Cassidy, BOSTON GLOBE, 4/29). Poe said that without a new investor or "cash infusion" the company can only remain in business for about two more months (Pereir & King, WALL STREET JOURNAL, 5/1). L.A. Gear's efforts to "rebuild its women's business suffered a setback" with the collapse of the deal. Although the company has lost money in each of the last four years, L.A. Gear President William Benford "is optimistic" that sales of the women's line will improve. L.A. Gear was "hurt by a foray" into men's athletic shoes. That strategy ended with a refocus on women's and children's shoes. SPORTING GOODS INTELLIGENCE Publisher John Horan: "Competing against Nike and Reebok is pretty difficult to do. They see in women's fashion, in Valley-girl type shoes, much more opportunity" (Denise Gellene, L.A. TIMES, 4/29). TEVAS FOR SALE? The growth of Deckers Outdoor (DECK) has been due in large part to their Teva sports sandal, examined in this week's BUSINESS WEEK. Revenues will jump to $105M this year, from $85M in '94, and one New York money manager speculates if Deckers "sustains its fast growth," either Nike or Reebok "may gobble it up as a quick way to step into sandals" (Gene Marcial, BUSINESS WEEK, 5/8 issue).