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The Drapers Interview: Skechers' $6bn plan

Skechers chief operating office and chief financial officer David Weinberg and managing director for the UK and Republic of Ireland Pete Youell

Drapers Footwear Awards winner Skechers is hatching plans to dress its customers from head to toe from its new state-of-the-art nerve centre in Hertfordshire

“Change brings opportunity,” says Skechers’ long-serving chief operating officer and chief financial officer David Weinberg. It is the morning of the official launch of the US footwear and lifestyle firm’s new UK head office and showrooms in St Albans, Hertfordshire. Skechers, which won Campaign of the Year at the Drapers Footwear Awards 2016, has increased its footprint from a 6,000 sq ft facility in Potters Bar to the new 17,500 sq ft space to support the growth of its highest-grossing international subsidiary.

Skechers’ new headquarters in Potters Bar

Skechers’ new headquarters in St Albans, Hertfordshire

Skechers’ new headquarters in St Albans, Hertfordshire

Weinberg’s words seem particularly pertinent as the event is held on the day more than half of UK voters opted to leave the European Union, causing confusion and uncertainty for many across the industry.

Indeed, as Pete Youell, managing director for the UK and Republic of Ireland, was waiting for Weinberg to arrive, he admitted the result of the referendum came as a bit of a surprise. Nonetheless, he is feeling confident about the path ahead thanks to a strong brand, new product development and close partnerships.

Weinberg is visiting the new facility for the first time and says it feels “just like home”, albeit on a smaller scale. The new UK head office has been designed in the same style as Skechers’ 50,000 sq ft main office in Manhattan Beach, California, complete with nine showrooms decked out with the latest audiovisual equipment and theatre-style lighting to display the vast range of men’s, women’s and kids’ shoes.

Weinberg, who became chief finance officer in 1993, just a year after the firm was founded, is fairly sanguine on the issue of Brexit, having navigated the firm through many economic ups and downs over the years.

“Profitability-wise, it is a bad thing for us, but if it gets more tourists and more people coming then it could be good,” he says. “It’s just such an overwhelming thing, but one thing’s for certain: it brings opportunity for someone.”

“There are always opportunities. You’ve just got to be ready.”

Skechers, now in its 24th year, prides itself on being ready to react to market opportunities, and the new UK office is a prime example.

“The European business played a pivotal role in our first quarter 2016 record sales of $978m (£754m) – and in particular the UK, which achieved one of our largest year-over-year dollar gains by shipping one and a half million pairs during that period,” Weinberg explains.

“We’ve had a nearly 50% year over year increase in our foreign markets, with the highest-dollar gains coming from our subsidiary business on this continent.”

There are always opportunities. You’ve just got to be ready

Skechers chief operating officer and chief financial officer David Weinberg

Skechers passed the $3bn (£2.3bn) revenue threshold last year, growing 32.3% year on year to $3.2bn (£2.4bn) in the 12 months ending December 31. Gross profit grew at the same rate to $1.4bn (£1.1bn). In 2009, in a joint interview with Youell, who was then in his third year, the company’s president Michael Greenberg told Drapers that the firm would double in size to $3bn turnover in five years.

“He didn’t miss by much,” laughs Youell.

What is probably more surprising is that Weinberg bullishly believes Skechers will do it again, to reach $6bn (£4.6bn) within the next five or six years.

“By order of magnitude, it’s probably not as aggressive as Michael’s numbers were that time, because now we have established where we can grow,” he says, pointing to markets such as China and South America. He also foresees continued expansion in Europe and the US, albeit at a slower pace.

Skechers brand ambassadors Kelly Brook, Sugar Ray Leonard and Charlie Webster

Skechers brand ambassadors Kelly Brook, Sugar Ray Leonard and Charlie Webster

Skechers brand ambassadors Kelly Brook, Sugar Ray Leonard and Charlie Webster

In its US domestic market, Skechers became the number two brand for athletic footwear last year, second only to Nike, and Weinberg believes there is similar potential in many other markets around the world, including the UK.

He puts this down to an ability to “take advantage of opportunities” very quickly, with the non-bureaucratic processes and strong balance sheet to act quickly when the time is right.

When the European market began to grow significantly two years ago, the Belgian distribution centre that serves Europe (including the UK), had just 500,000 sq ft of space.

“It would take most companies years before they could dedicate the amount of resources [to react to growth],” says Weinberg.

“We put a commitment together for our landlord in Belgium and invested €25m (£21.3m) in equipment – all to be done in two years from beginning to end, from thought to implementation,” he explains. “That’s not usually something that happens very quickly.”

The company has similarly invested significantly in China, with facilities in Guangzhou and Shanghai, and has refitted its showrooms across Europe to “show how committed we are”.

Sandals have even done really well for us, despite the weather

Pete Youell, Skechers managing director for the UK and Republic of Ireland

In the US, Skechers outgrew its US distribution centre and within four years from planning to its November 2011 completion, it had opened 1.85 million sq ft of space and installed $100m (£77m) of new equipment.

“They’re some pretty staggering numbers,” Weinberg admits. “Particularly for a little kid from the Bronx.”

Of course, with this scale of investment there is an expectation placed on the level of return. It is something Youell is aware of, particularly as trading hasn’t been the easiest for the industry as a whole across the UK over the last few seasons thanks to unpredictable weather and changing shopping habits.

Skechers Go Walk

Skechers Go Walk

Skechers Go Walk

But like Weinberg, he is not fazed by it. He says the firm is in “good shape across the board” and has plenty of opportunity ahead across is vast portfolio, which spans lifestyle, comfort and technical footwear.

“Sandals have even done really well for us, despite the weather,” he says. “They were selling well in February.”

He believes Skechers is well placed thanks to its comprehensive range of around 3,000 products by style and colour, its technical innovation and its close partnerships with a “balanced base” of department stores, family chains, athletic retailers and indies.

Colin Temple, managing director of Schuh, describes Skechers as “well run” and “very commercial”, praising the firm for its celebrity endorsements from the likes of Kelly Brook and Demi Lovato, and for carving out a niche within the Go Walk and Go Run comfort performance product ranges.

Skechers clothing will go from nowhere to everywhere in the world within moments

Skechers chief operating officer and chief financial officer David Weinberg

But he does see some challenges with the growth of Skechers’ own-branded retail store portfolio, which currently stands at 43 across the UK and Ireland. “It could be a hard balance to get right with the wholesale partners,” says Temple. “But their own factory outlets do keep distribution quite clean.”

It is an issue raised by another stockist, who asked not to be named. He has seen good growth in sales of Skechers over the last five years, but says womenswear sales have slowed this year. “The Skechers brand is marketed very well and the people are good, fair and supportive to work with, but for me the brand is losing some of its credibility because of discounting and overdistribution,” he adds.

It is a challenge facing many brands, but Youell is keen to underline that growth of own retail, which stands at around 25% of the total business in the UK, will be slower and more measured than in Europe or other territories, where the brand is underrepresented.

He maintains that: “a balance of own retail and wholesale is needed to present the concepts and product to their fullest extent”.

“We’ll develop at a steady pace to ensure we continue to grow the brand reach, awareness and demand for all our distribution channels here,” he says, adding that discounting levels are also carefully managed.

Flagship launch

The next big opening will be a flagship store on London’s Oxford Street, set for November. Youell explains that the firm uses its stores to help showcase facets of the brand that are new to the consumer. “The stores also act as a test base for new ideas, most of which then turn into big things for our wholesale partners.”

Skechers UK headquarters sport showroom

Skechers UK headquarters sport showroom

Skechers UK headquarters sport showroom

Weinberg says the firm looks at all categories of footwear for new product development and can get a new design from concept to prototype into its own retail stores for testing in 120 to 150 days. More technical items can take longer – up to a year.

“We’re not looking to get a hot line and sell it for the next 25 years. We’re looking for the changes with room to grow in every category,” he says.

The Oxford Street flagship, which will be Skechers’ biggest to date, will also showcase some of the brand’s new clothing line, which is already available in the US in Skechers own retail stores and at Skechers is initially introducing apparel within its own retail portfolio to make sure consumers “get it”, and then will roll out further.

The clothing line is early in its development, but Weinberg says the sector offers a lot of room for growth and could end up being responsible for around half of the total business in the long term. It will be initially focused around the running and fitness categories, and retail prices range from $20 to $85 (£15.40-£65.45).

“There certainly is potential available to us, but we don’t want to move too quickly,” he explains. “Brand perception is very important to us, and apparel can either be a big brand builder or a big detriment to the brand, depending on how you pull it off. We have to be very careful, probably more so than most.”

“But one thing you can be sure of is that when it gets traction and when we think the timing is right, we’ll have the capital and we’ll certainly be in a rush to get it out,” says Weinberg. “I just don’t know when that transition period is – not this year, probably not next year. It happens at different times with different products, but you can be sure we will allocate enough resources to it.

“It will go from nowhere to everywhere in the world within moments.”




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