From the "Wall Street must have short memories" department:
If this market ever heats up again (or even if it doesn't), expect to hear lots about the pending $90-plus million IPO of
, the maker of the red-hot Skechers line of sneakers. If you have kids, especially teenagers, chances are at least one pair is in your house. The boom in these shoes has been fast, with sales last year of $183 million, nearly five times what they were when the company started in 1993. In the first quarter alone sales jumped 117% from a year earlier during the same period it chalked up its first-ever profit.
So, why worry? Does
ring a bell? The CEO and marketing mastermind of Skechers is none other than Robert Greenberg (no relation, which is one plus for him). He was also the CEO of LA Gear, the sneaker sensation of the early 1990s. LA Gear's stock, sales and earnings experienced a rapid rise and an equally fast flameout after resorting to the old trick of stuffing the channel with inventory to help make its sales and earnings look better than they really were. Nearly out of cash, the company brought in Roy Disney's
to help turn it around. Shortly thereafter, in 1992, Greenberg left. LA Gear never quite recovered, and this past June filed for bankruptcy reorganization.
While Greenberg wasn't around for the bankruptcy, he was in charge when the company first faltered. That begs the question: Will it happen again? Too early to say, and Skechers execs wouldn't comment publicly, citing the pre-IPO quiet period. But Greenberg has told some analysts that he learned quite a bit from the LA Gear fiasco. And unlike LA Gear, which was primarily a girls' product, Skechers is worn both by girls and boys (women and men).
Also, unlike LA Gear, which was sold primarily through shoe stores, Skechers also has distribution through the leading department stores. Still, during the first quarter the top five customers represented an uncomfortably high 31% of sales -- fine when times are good but a big chunk of sales to lose if times turn bad.
Then there's the issue of management. "Greenberg has always had a nose for what's hot and fabulous," says one analyst, who has followed his career. But this analyst adds, "He has trouble in the more mundane aspects of systems, management and money." It's not clear that his management team can pull up the slack. Greenberg's 35-year-old son, Michael, another ex-LA Gearite, is president, and David Weinberg, LA Gear's former head of credit and collections, is CFO. (He has no prior experience as a CFO.) Three other Greenberg children serve as vice presidents.
Finally, there's the standard caveat: The footwear business is notoriously competitive and consumer tastes -- especially in Skechers' core market of teenagers -- are famously fickle. LA Gear, under Robert Greenberg, was the ultimate example of that.
A very brief item
yesterday from my spies at the
Salomon Smith Barney Tech Conference
said that semi equipment manufacturers at the conference report that their business "has stopped. Dead." That prompted
Legg Mason's Randy Befumo
, who was also at the conference, to weigh in with a slightly different version of the story: "While
did offer guidance of down 15% to 20% sequentially instead of 10%, and the back-end guys on the panel (including
Electro Scientific Industries
), were not the happiest bunch in the world -- saying the business stopped dead is an overstatement. Kulicke even said they went back to three shifts because of two big orders they got from Taiwanese contract fabs, although they do expect to go back to layoffs when those orders are done. I think the info is incrementally more negative, but only slightly -- like 5%."
Befumo says he has been "most surprised by the empty rooms, given that a year ago people were packing in the rooms as analysts busily valued these things at 20 times 2000 earnings. Unless we have a major deflationary recession or PC demand goes to zero in 1999, the franchise players are now trading at probably 6 to 10 times 2000 earnings (assuming a mid-'99 upturn) with better cost structures, higher market shares and less competition. Gotta love it."
Over the long term, perhaps, but short-term, "It's less positive than people were thinking," says money manager Jeff Matthews of
, who was also at the conference. "The upticks people are talking about, particularly in the disk drive area, are nothing more than seasonality."
A year ago, he says, companies at these conferences were boasting about how good their business was and analysts were frightened that the good times couldn't continue. "There's none of that now," he says. "There's zero. None."
So, then, what's with this
announcement late in the day about higher-than-expected revenues in the third quarter? This morning on
"Today's Business" I shrugged it off, saying that considering that Intel suffered through the
-stuffed-channel syndrome earlier this year, it was only a matter of time before orders to Intel picked up.
Shortly after saying that, though, I received an email from Michael Murphy of the
California Technology Stock Letter
, who disagreed, saying: "We'll ship 91 to 93 million PCs this year vs. 80.5 million last year. After a slow June, PC sales picked up immediately after the Win98 intro. Average prices are going UP $100 or so in the second half, after falling $200 in Q1 due to the Compaq inventory liquidation. Sub-$1,000 is 60% of U.S. retail, but that sector is only 10% of the total world market. So 94% of the market is desktop/notebook, where Intel has an 85% market share. Intel's low-end Pentium IIs are on allocation (so much for the excess capacity story). The new Celeron is at least a contender. And remember half of all PCs are sold in Q4."
Considering that Murphy called the PC boom right, his comments shouldn't be ignored. Does that mean he's right? Let the games begin!
: The electronic cards and letters continue to roll in on this subject, and it's still about half for and half against
Mach3. "Gillette has been my largest holding for many years," writes reader Jay Herrington, of Gainesville, Fla. "After testing the razor for a week, I sold 90% at 53 and I am so happy I did. I suspect I can one day buy it back to the low thirties." The most astounding comment, however, was from none other than the honorable
yesterday wrote in one of his columns that he likes the three-bladed sword. Whoa! Isn't this the guy with the partially haired face? Some testimonial!
(Also, thanks to all who weighed in on this column's Mach3 challenge. Sorry I couldn't personally respond to you all. Had a column to write.)
Bee or fly?
: That's the question regarding that insect in the logo on
heavily read "Options Buzz"
column. Any entomologists in the house?
Time to chat:
tries something new, as Marc Cohodes of
joins me on my next
Chat. Cohodes has been aggressively short a number of companies mentioned in this column, so the discussion should be lively. Join us on Tuesday, Sept. 15, at 5 p.m. EDT. The address is
Herb Greenberg writes daily for TheStreet.com
. In keeping with the editorial policy of
, he does not own or short individual stocks. He also does not invest in hedge funds or any other private investment partnership. He welcomes your feedback at firstname.lastname@example.org. Greenberg also writes the monthly "Against the Grain" column for