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The Briefing

The year was 1999 and what a year it was for the 36-year-old Westlake Village-based K-Swiss Inc. Sales skyrocketed to $285 million from $161 million in 1998; earnings nearly tripled to $34 million from $12 million. But there was a glut in the athletic footwear market and many of K-Swiss’s customers started either closing up shop or filing for bankruptcy. By the time 2000 rolled around, K-Swiss Chairman and President Steven Nichols knew it was going to be difficult to keep up the pace. One by one, K-Swiss’s customers found ways to cope with the onset of a weakening economy. Another shoemaker might have tried to expand its distribution into mass market stores, but K-Swiss held its ground, fearing the brand it had built would be tainted by widening distribution. Nichols recently spoke with Business Journal reporter Jacqueline Fox about the challenges K-Swiss faced last year. “1999 was a stellar year for us, but when we looked at the year 2000 we knew it would be a down year and the growth simply could not continue because many of our important customers were in big trouble. There were simply too many stores out there, too many square feet of retail space selling athletic footwear and there had to be a correction. “One of our top-10 customers, Just For Feet, filed for Chapter 11. We stopped selling to Oshman’s Sporting Goods for credit reasons and Foot Locker shut down about 200 of its stores. Our sales declined and we finished at $221 million (in sales) and we earned $21 million, so it was down significantly. Our challenge was how to keep true to what our brand stands for. One of the ways we differentiate ourselves is we have upscale and limited distribution. So one of our options for 2000 would have been to seek distribution in new markets, but we decided not to do that. We decided to stay true to our long-term plan and look beyond 2000. Now we are looking at 2001 and Just for Feet has reorganized and been purchased by a solid company. Oshman’s was also bought and is back in business and financially strong. Foot Locker is now opening stores again and looking for good locations. The market saw how we handled a bad year and both retailers and consumers respect our brand even more. Many of our current retailers tell us that we are the most profitable and highest turning brand in their store.”

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