SBJ/June 8 - 14, 1998/No Topic Name
Fila USA taps Adidas executive to halt skid
Published June 8, 1998
Caught in a financial free fall that has sent its stock plummeting from $104 a share to $18 a share, Fila USA is in the midst of an extensive retooling effort that begs the question: Can the company reverse its dramatic slide?
The Italian athletic footwear and apparel company, which last year saw its U.S. sales fall to $682 million, compared to $750 million in 1996, will lay off about 20 percent of its 950 U.S. workers by the end of the year and close operations in several cities.
Last Tuesday, the company named Jon Epstein as chief executive officer of Fila USA, which is based in Sparks, Md. Epstein, who replaces Robert Liewald, spent two decades at Adidas America, the only shoe company that is holding its own in a chaotic domestic athletic-shoe market.
Fila is also reconfiguring its product line.
Though the company will maintain a presence in basketball by virtue of its deals with NBA stars Grant Hill, Jerry Stackhouse and Chris Webber, Fila is now focusing on the running and soccer categories to draw in new, younger customers.
How, in a span of just 18 months, did Fila see a such a dramatic decline in business?
"The company lost its direction and it floundered," Epstein said. "There was too much product and too many styles, all without much of a message."
Fila is not the only shoe company to have problems in a changing athletic-shoe market as consumer tastes shift toward brown shoes and boots. Reebok and Nike also have seen their earnings erode.
Epstein promises that the Fila USA of the future will be a more streamlined operation.
"My focus is to make [Fila USA] smaller, more efficient," he said.
However, things may get worse for Fila USA before getting better.
According to Fila's chairman, Enrico Frachey, the U.S. market will account for one-third of the company's 1998 worldwide sales. In 1996, U.S. sales accounted for almost 60 percent of Fila's nearly $2 billion in overall revenue.
"Unfortunately, the market depression, together with the effect of the very significant close-outs operated by some competitors, will certainly not facilitate a rapid recovery," Frachey said.
Like other shoe companies, Fila USA must adapt to American consumers who are turning away in droves from high-priced basketball shoes endorsed by legions of NBA stars.
Said Fila USA Vice President Howe Burch: "Because the whole industry has grown so dramatically, there has been a proliferation of products and athletic endorsers....At some point, consumers have gotten tired of it all. We're in a tough period now, but we are taking corrective measures. Our overriding theme is that we will consolidate and focus on our core categories that will include running, soccer, and basketball."