When the (Retro) Shoe Fits

Makers of athletic sneakers are going back to the future by reissuing old favorites.
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Kids who searched out

New Balance's

Model

320

sneaker this summer for its boxy shape cared little that it had been named the No. 1 running shoe by

Runners World

magazine when it was first introduced. That was in 1976 -- before today's teenage sneaker buyers were born.

Now kids are buying the shoe for fashion, not fitness. And sneaker companies, in their everlasting quest for new products, are turning to these old standbys to juice stagnant sales. Manufacturers are remaking sneakers that have been out of production for as long as 30 years, first in their original form, and then by adding high-tech modifications, and selling them in limited quantities. While several sneaker companies have always carried products with a nod to the past -- most famously

Converse's

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Chuck Taylor

basketball shoes -- the current crop differs in that it has largely been unavailable for a decade or longer.

"There is a huge retro trend that's been in the market for the past year," says Erin Patton, a spokesman for

Nike's

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Jordan Brand

, which has been supplying

Venator's

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Foot Locker

chain with out-of-production

Air Jordan

shoes. "The quantity is limited," Patton continues. "Once the supply is exhausted -- that's it."

True, the sneaker biz has always tried to generate demand by limiting supply. But consumers, who've been bludgeoned by rapid-fire product launches, "are now looking for the roots of where this all came from," says Dennis Baldwin, vice president of

Reebok's

(RBK)

classic division, which for a six-month run is bringing back the

LX8500

running shoe that first appeared in the '80s.

Retailers like the strategy, because it turns customers into collectors. The thinking: If you want that canary yellow

Saucony

(SCNYA)

Jazz

, you'd better buy it now before it's out of production.

And manufacturers, in addition to generating some excitement in what has been a lackluster sneaker market, are realizing some cost benefits. R&D, production and marketing expenses are often lower the second time around. And lower costs allow sneaker companies to give consumers what they really want -- cool shoes for less than $100.

"In the heyday of athletic footwear in the '80s, kids dressed from the ground up," says Art Rogers, Saucony's president. "The No. 1 purchase was the shoe. Today, they're dressing from the top down. Footwear is an accessory, and kids are spending less money on it."

Sneakers and urban kids have long been locked in a strange marketing dance, with the latter often dictating what athletic conglomerates produce. The relationship was cemented in the '80s, when hip-hop group

Run-DMC

made

Adidas

their signature look. The group even wrote a song called

"My Adidas" .

"Hip-hop has always been fascinated with sneakers," says Mimi Valdes, former sneaker editor for

Vibe

magazine and current editor-in-chief of hip-hop tome

Blaze

. "Retro is a nod to a certain era," she continues. "It was the beginning of athlete-inspired footwear." It was also around that time in the late '70s and '80s that rap music came into its own.

Saucony, which had $106 million in sales last year, has more to gain (and potentially to lose) from the retro revival than do larger companies like Nike and Reebok. That' s because 45% of Saucony's sales this year will come from retro products, compared with 25% last year -- the first they were available. (By contrast, retro shoes make up a fraction of Nike or Reebok's total sales.) Saucony's stock has marched higher, nearly doubling this year, as the retro trend has caught fire.

This focus on fashion is a departure for a company that traditionally depended on high-performance athletic shoes. Today, Saucony even has a special

Web site dedicated to retro, where customers, in addition to checking out new sneaker colors, can play old computer games like

Missile Command

. Next in Saucony's retro line: the '77

Hornet

shoe, which will be reintroduced this spring and retail for $35. "That's the lowest-priced shoe we've ever sold," Rogers says.

Saucony can afford to sell sneakers for the price of a good meal because it's using the original molds, which have already been expensed. Also, Rogers says the retro shoes require about 10 pieces to manufacture, compared with double the components for a modern shoe.

John Shanley, an analyst with

First Security Van Kasper

, estimates that Saucony typically generated gross margins of 35% on fashion shoes, but margins on retro sneakers are approaching 37%. "That's the same gross margin they get for technical shoes, which retail for $160," he says. (Shanley rates the company a buy. His firm hasn't performed underwriting services for Saucony.)

Those favorable trends could reverse for Saucony should the retro grow cold. That's why other manufacturers are taking a more cautious approach.

"Retro will drive sales for a while, but we don't want to build our whole business around it," Reebok's Baldwin says.

Likewise, New Balance has no plans to bring back any more retro shoes, although the company has seen demand for its products surge since its model

576

(with the big N on the side) appeared on a Paris runway in 1997.

"It's a fad, and any kind of fad will fade," says Adriane Kjellquist, a spokeswoman for the privately held company.

But for now, kids are still snapping up multiple pairs of Saucony's retro Shoes with the signature triple dots. Shanley, the analyst, recalls a recent visit to

Dr. J's

, a bustling sneaker retailer on New York's 125th Street: "A young guy came in with some pants that he'd recently bought. He picked out six pair of Saucony sneakers -- one to match each pair of pants."