Thursday, May 24, 2007

Feet, do your stuff Two announced footwear deals graced the business pages this past week. The parallel moves (and a third announced bid) indicate the way in which sectors seem to fall intro alignment. First was the announced purchase of Stride-Rite, a US shoe maker and store chain by a rival, the discount store chain Payless ShoeSource. The deal is for $800 million. The new company will retain the two chains under the same names, but the holding company will be called Collective Branding .(Payless bought US-shoe design and marketing Collective Licensing International in March). Stride-Rite owns the brands Keds, Saucony, Top-Sider, and Tommy Hilfiger Footwear as well as 215 stores, a number of operations in department stores and about 80 discount warehouses. These are higher-priced brands than those of Payless, which sells highly discounted shoes at its 4,500+ stores. According to a Wall Street Journal story ("Payless Is to Purchase Stride Rite For $800 Million in Upmarket Move", 5/23/07), Stride-Rite shoes often sell for $50 or more, while Payless shoes sell for $15 or less. Second was an announced alliance between #! US athletic shoe retailer Foot Locker and athletic shoe giant Nike, its largest supplier and the largest athletic shoe manufacturer in the world. The two will open a new specialty retail chain called House of Hoops by Foot Locker," to sell Nike's Converse and Jordan subbrands. The two will open up to 50 stores over the next three years. This comes as sales of basketball footwear, long the big profit point for both companies (think Air Jordans), are slipping, with Foot Locker profits down 75% from first quarter last year. These shoes, which can cost $150 and more, Foot Locker, which has a long history with Nike, represents 10% of Nike sales worldwide and 15% in the US, according to a Wall Street Journal story ("Foot Locker and Nike Form Own Team to Sell Shoes." Meanwhile, Foot Locker is bidding to buy US firm Genesco, which owns the Johnston & Murphy (men's dress and casual) and Journeys (athletic) shoe store chains as well as a variety of hat stores (Hat Shack, Hat World). Altogether Genesco has over 2,000 retail outlets.) Foot Locker's bid of $1.2 billion has been declined as too low. That is the opening round. 9:54:56 PM

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