STOUGHTON, Mass. -- The inspiration Reebok chairman Paul Fireman pumped into company employees last fall when he proclaimed Reebok would regain the number one sports-and-fitness-company crown by the end of 1995 has yet to materialize at retail.
The first quarter, while positive, was not enough to close ground on industry leader Nike Inc., and was somewhat marred by less-than-expected sales of its Shaq Attaq shoe.
While in fact losing market share to Nike in the first full quarter of Fireman's mandate, Reebok attributed the poor Shaq Attaq showing to a variety of reasons, from a poorly executed marketing plan to production problems affecting the delivery date to Mother Nature, which whipped up an East Coast-paralyzing blizzard on March 13, the Shaq Attaq launch date.
Nonetheless, earnings grew 8.7 percent in the quarter ended March 31, to $67,769,000 or 74 cents per share from $62,303,000 or 67 cents a year ago. Sales were up 3.4 percent to $825.2 million from 1992's first-quarter sales of $797.4 million.
In the United States, footwear sales gained 2.9 percent in the quarter to $358 million. Sales of branded Reebok shoes worldwide were up 7.1 percent to $720,500,000. Reebok's Rockport division grew 1.5 percent to $68.3 million while Avia sales dropped 10 percent to $36.4 million. Some analysts, requesting anonymity, said estimates of Reebok's futures at quarter's end ranged from flat to 6 percent below last year.
By comparison, Nike recently reported a 12 percent sales gain and an 8.4 percent gain in earnings for the quarter ended Feb. 28. In the United States, Nike footwear sales improved 15 percent in the quarter. Worldwide futures were up 21 percent.
'They did a little better than I expected,' said Alice Ruth, an analyst with Montgomery Securities, San Francisco. 'Their gross margins were a little better' than last year. She added Reebok didn't get hit as bad in currency exchange as she had expected.
Ruth said Reebok's backlog is down slightly, attributing it to Reebok's Centennial pricing program. She said this is hurting the company's up front volume. 'More of their business is shifting to at-once business.'
But Reebok, which made the head-to-head sales race with Nike its raison d'etre, claims it is too early to start drawing comparisons. 'The first three months of the year isn't going to change our goal,' said Kate Burnham, director of investor relations and corporate communications, who noted Reebok stands by its goal of becoming the number one sports and fitness company by 1995.
Burnham said Reebok posted strong growth in its apparel divisions, growing 38.3 percent in the quarter, although growth came against a small base. Last fall Fireman noted that apparel, cleated and basketball were key categories to accelerate its growth in order to overtake Nike.
While retailers praised Reebok's fitness and cross-training lines, they expressed disappointment in the Shaq Attaq which, although promised earlier, did not appear at retail until the end of the quarter, on March 13, just in time for the most powerful blizzard of the winter.
'They did a great job marketing Shaquille O'Neal and the Shaq shoe,' said Evan Lederman, footwear buyer for City Sports, Boston. 'But they may have waited too long to get the shoe on the shelf. The demand was there in January and February and the shoe didn't come out until March,' he said.
At The Finish Line, Indianapolis, David Millburn, senior footwear buyer, said he still believes in the future of Reebok and Shaq. 'Remember the first several Air Jordans didn't fly out of the store.'
Tom Carmody, vice president, Reebok's Sport Division, said Reebok performed a bit of a shoemaking miracle just getting the shoe out by March 13, having just inked O'Neal's contract shortly before the NBA season started in November. All in all, Carmody said, expectations for the shoe were higher. 'We're pleased but not estatic,' he said of the shoe's early performance.
Carmody agreed with retailers that a Super Bowl launch would have helped. He said March 13 was not the best time to launch a white-based athletic shoe. Carmody added that sales were further hampered when Nike came out with its Air Jordan's a month before the Shaq Attaq hit retail.
A black-based shoe will be delivered in July followed by a November Insta-pump Shaq Shoe. While some retailers complained of the $135 price tag, Carmody said the price will remain the same with a children's model at $100 to be added.
Carmody said the company failed to alert consumers when the shoe would hit at retail and failed to explain technical benefits of the shoe, such as graphlite.
By revving the hype machine in January but not planning deliveries until March, Reebok did its Beaverton, Ore., rival a favor, Carmody said. 'We drove a lot of people into stores to buy Nike shoes,' he said. 'We created a lot of excitement for the category without having a shoe out there. Nike owes us one,' he joked, promising retailers a better-coordinated effort this fall.
Retailers on Reebok & its Shaq Attaq: Rookie Mistakes
NEW YORK -- It's early, very early, in the first quarter of the Reebok Shaq Attaq sales game, but the shoe is getting blown off the court. Retailers, hoping the rookie's signature shoe would pump some magic into their sales, said the problem wasn't O'Neal (who, they said, was a true NBA superstar and a marketing juggernaut) but rather Reebok being a rookie in the high-performance, signature, $130 basketball shoe game.
Retailers pointed out four basic rookie mistakes (listed below) made by Reebok in launching its first Shaq Attaq, and said they looked forward to the Stoughton, Mass., company's tweaking of the gameplan a bit.
COLOR: Black basketball shoes have been more popular than their white brethren for a few years, especially during the colder months, but Reebok decided to make the first shoe, launched in a blizzard, snow white. Mike Beauchamp, assistant manager, The Competitive Foot, with a store in both Western Springs and Oak Park, Ill., said the Shaq Attaq has gone over 'only marginally' while Nike's Air Jordan (offered in black) 'performed really well.' The Shaq Attaq has been flat and perhaps coming out with it only in white and not in black cut into their success, he said.
TIMING: The Super Bowl, the NBA All-Star Game and tons of athletic footwear advertising on the tube in late January and early February energized the masses, who trekked to stores to find plenty of Air Jordan's but the O'Neal Shaq Attaq beyond the horizon.
'They did a great job marketing Shaquille O'Neal and the Shaq shoe,' said Evan Lederman, footwear buyer, City Sports, Boston. 'But they may have waited too long to get the shoe on the shelf. The demand was there in January and February and the shoe didn't come out until March 13.'
PRODUCT: The shoe looked big and bloated and surprised customers, who, retailers said, were expecting something hipper than a blue satin-y tongue as well as a sleeker sneaker. David Millburn, senior footwear buyer, The Finish Line, Indianapolis, said the Shaq shoe 'missed what the customer was expecting it to be,' he said, 'especially when it came to the cosmetics of the shoe.'
PRICE: Retailers said Reebok didn't deliver a shoe that looked like it should be priced at $130 retail. Millburn suggested customers were not used to paying $135 for a Reebok sneaker and were therefore hesitant. In fact, some New York retailers told FN they heard high schoolers commenting '$130 for a rookie shoe, no way!'
