Converse Kicks Around the Super Show - TheStreet

ATLANTA -- It is fitting that

Converse

(CVE) - Get Report

, whose stock has been on the rebound in recent months, signed the

NBA's

king of rebound,

Dennis Rodman,

to a sneaker contract late last month.

Converse's stock suddenly has the legs of the colorful

Chicago Bulls

forward, soaring from 3 7/8 several months ago to 20 3/4. On Wednesday alone, the stock moved 4 3/8, or more than 20%, on news that the company had settled legal problems and that two analysts had upgraded the stock to a buy. On Thursday, Converse rose 1/8 to 20 7/8.

"We're a revitalized brand," Converse Chief Executive Glen Rupp excitedly told a roomful of analysts and reporters attending financial day at the

Super Show,

the sporting goods industry's largest convention, held annually in Atlanta.

Converse, the original maker of basketball shoes, has always maintained a strong brand name with its classic

Chuck Taylor

All Star canvas shoes. More than 550 million pairs of the shoes have been sold since their introduction in 1917.

In the past few years, however, Rupp says the company strayed from its focus with high-heeled Chuck Taylors sporting "metallic and glittery designs." In addition, the number of footwear lines grew out of control before it was reined in and limited to four categories: basketball, cross-training, athletic/leisure and children's.

In the fall, Converse introduced the Chuck Taylor All Star 2000 shoe that combined high performance with its retro image and has been a huge hit. Sellthrough was a phenomenal 25% per week at retailers, compared with a normal sellthrough of 5% to 10%, says Faye Landes of

Smith Barney

, one of the analysts who upgraded the stock from outperform to buy on Wednesday.

Landes says she waited to upgrade, despite being impressed by sales of the All Star 2000, to make sure that it wasn't just a "flash in the pan." Earlier this week, after talking to the company and hearing how hot orders were for the new

Dr. J.

shoe, she quickly made the move. Landes says that the company was comfortable with her raising her earnings expectations for 1997 from $1.00 per share to the $1.35 to $1.45 range.

This would be a continuing sign of improvement in the company's income statement.

(A previous version of this story incorrectly referred to the company's income statement as its balance sheet.)

In the third quarter, ended Sept. 28, income from operations was $3.1 million versus a loss from operations of $2.2 million for the year-earlier period. The net loss in the third quarter narrowed to $3 million, or 18 cents per share, compared with a net loss of $6.6 million, or 39 cents per share, for the same quarter of 1995.

The company is taking an aggressive and risky approach to become the number three brand in the sneaker universe behind

Nike

(NKE) - Get Report

and

Reebok

(RBK)

with its signing of Rodman.

While several analysts questioned how the NBA's bad boy would fit in with Converse's retro image, Rupp went to great lengths to defend the signing of Rodman. He said that in a poll of 1,500 kids, taken after Rodman kicked a cameraman during a game and was subsequently suspended, there was "resounding support, fascination and enthusiasm for Dennis."

Scott Emerman, an analyst with

Dean Witter Reynolds,

agrees with Landes that the stock will move higher over the short term, but he is worried about how long the brand will stay hot.

(A previous version of this story incorrectly reported that Emerman was an analyst with PaineWebber.)

"The Converse All Star 2000 was a blowout product," he says. "My concerns are more with how much long-term potential the brand has." Emerman does not have a rating on the stock.

By Avi Stieglitz

astieglitz@thestreet.com