DC Shoes, Inc.

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DC Shoes, Inc.

1333 Keystone Way, Unit A
Vista, California 929801-8311
U.S.A.
Telephone: (760) 599-2999
Fax: (760) 597-2511
Web site: http://www.dcshoeusa.com

Private Company
Incorporated: 1993 as Circus Distribution, Inc.
Employees: 150
Sales: $100 million (2003 est.)
NAIC: 315299 All Other Cut and Sew Apparel Manufacturing; 316219 Other Footwear Manufacturing

DC Shoes, Inc. produces footwear for extreme sports, specifically skateboarding, snowboarding, surfing, motocross, and BMX. Two million pairs of DC shoes were produced in 2001. The company also sells shirts, pants, jeans, shorts, jackets, caps, backpacks, and other accessories. DC Shoes experienced explosive growth during the mid-1990s and remained one of skateboarding's top brands. It has been able to successfully gain nationwide, mall-based distribution while keeping hard-core skateboarders loyal by offering exclusive designs through skate shops only.

Origins

In 1989, at the age of 22, Ken Block, a snowboarder, began creating a line of screen-printed T-shirts that would become the Eightball brand. He honed his computer design skills at Palomar Community College in San Marcos, California, where he met a skateboarding schoolmate, Damon Way, in an algebra class a few years later. Way helped find stores to sell Eightball clothes. Way's brother, Danny Way, became one of the first pro skate-boarders to endorse the line.

Block's parents had loaned him $10,000 to expand Eight-ball, according to Agents of Change: The Story of DC Shoes and Its Athletes, enabling the operation to move into a rented 750-square-foot warehouse. Way and Block contracted another fellow student, Aaron Lovejoy, to screen-print T-shirts.

Eightball's unique designs proved instantly popular with skate shops. They turned to a friend's father, Clay Blehm, for advice in financing their explosive growth. Blehm was then an unemployed accountant who had launched several businesses during his career. These included a childcare center and Christmas tree business. As the company grew, Blehm was named chief financial officer. Block was the company's president and CEO.

The success of Eightball led to the creation of the Droors ("drawers") brand of jeans in 1992. Eightball/Droors moved into a 3,300-square-foot facility in Carlsbad, California in January 1993. On October 3, 1993, the business was incorporated as Circus Distribution, Inc. Revenues for the year were more than $1.5 million. The Eightball brand was retired (at least in the United States) after someone else claimed ownership of the name in 1993.

DC Shoes Launched 1994

In 1994, Way launched a footwear line, DC Shoes, named, according to one version of the story, after the first initials of Danny Way and that of another pro, Colin McKay (another version has it standing for "Droors Clothing Shoes"). The company contracted Vans, then Etnies to produce the first shipments of shoes before settling on a Korean manufacturer, the Samil Tong Sang Company.

Yet another brand, Dub, was introduced in the fall of 1994 on a line of weatherproof outerwear for snowboarding. Snow-boarding was a natural extension. Half of skaters snowboarded, according to a survey by market research firm Board-Trac cited by the San Diego Tribune, and 40 percent rode BMX bikes.

In October 1994, the business moved to a still-larger, 16,000-square-foot facility. Blehm became a partner in the company with Block and Way in January 1995. Revenues were about $7 million in 1995, more than double the previous year's. The company had about 35 employees. Circus ended 1996 with 50 employees and revenues of $21 million.

DC Shoes was one of the first skateboard shoe companies to make extensive use of professional endorsements. In 1996, DC's skateboarding team had grown to eight pros who went on a world tour in 1997. Motocross and surf teams were assembled by the end of the year.

DC garnered tremendous coverage from its promotional events designed to showcase its pro's talents. One of the most notable was when Danny Way jumped ten feet from a helicopter to a ramp adorned with DC Shoes logos. The growth of extreme sporting events such as the X Games further increased DC's exposure.

Droors and Dub were sold off in 1997, eclipsed by the DC Shoes brand's triple-digit growth in the mid-1990s. In 1998, Circus Distribution was renamed DC Shoes, Inc.

DC produced its first television advertising in the summer of 1999. A line of children's shoes debuted in the fall of 1999. Revenues dropped slightly to $43 million for the year but rose again to $60 million in 2000.

A Hot Property in 2000 and Beyond

The DC brand was a hot property. During 2000, the company settled a lawsuit against an alleged counterfeiter and closed a dealer it said had resold products to unauthorized stores. At the same time, DC was offering graphics kits in conjunction with One Industries for labeling dirt bikes with the DC logo.

The number of skate shoe brands proliferated from six to 30 during DC's first six years, reported Sporting Goods Business. By this time, DC was shipping product across the globe. Its shoes were already being marketed in mall-based stores. Many footwear companies found to their peril that their core consumers frowned on brands becoming too mainstream or reaching too many non-skaters. However, DC Shoes was able to successfully expand its distribution in the late 1990s to chains such as Pacific Sun, Copeland's Sports, and Nordstrom. As the San Diego Union-Tribune noted, DC kept hardcore skaters happy by reserving certain styles for mom-and-pop skate stores and regional surf and skate chains.

Giant footwear companies such as Nike and Reebok were attempting, with limited success, to enter the skate shoe market. As the Los Angeles Times noted, DC had itself looked to the athletic footwear industry for design and marketing inspiration.

By 2002, DC's administration and distribution facilities in California encompassed 150,000 square feet of space. DC had built an indoor training facility, called Vista TF, for its skate-board team in 2001. The company also constructed a training and testing center for snowboarding, the DC Mountain Lab, near Park City, Utah.

Australian surfwear manufacturer Billabong International Ltd. offered to buy DC Shoes in 2002. However, the deal fell through. Along the way, Blehm was terminated; he then sued DC and Billabong, claiming age discrimination. DC countersued, alleging breach of fiduciary responsibility on Blehm's part. The company was also enduring an IRS audit at the same time.

The film DC Video celebrated the aerial exploits of DC's two original endorsers, Danny Way and Colin McKay. It took three years to make and was released in July 2003. Footage included Way's record 75-feet-long and 23½-feet-high jumps. After years of involvement with the company, Danny Way and Colin McKay received equity stakes in DC Shoes in September 2003.

DC's celebrity endorsements extended beyond professional extreme athletes. The company developed a signature shoe with the rock group Linkin Park. It had also sponsored musical tours like Sno-Core. DC's Artist Projects produced limited runs of shoes designed in collaboration with artists such as Shepard Fairey, Thomas Campbell, and Phil Frost. In the early 1990s, DC featured hip-hop DJs in its print ads.

DC-branded skate-oriented outerwear was introduced in 2002. DC launched a new brand of shoes, Fallen, with popular pro skateboarder Jamie Thomas in October 2003. Fallen shoes reflected the edgier fashions preferred by core skaters, as opposed to the more general skateboarding market targeted by the DC Shoes brand. A line of girls' clothing was developed for spring 2004.

DC collaborated with Yamaha to develop the DC/Yamaha SXViper Mountain snowmobile. The vehicle was designed specifically to take snowboarders to backcountry powder, that is, to climb steep terrain faster than stock snowmobiles. DC had become acquainted with Yamaha through motocross events.

Company Perspectives:

DC Shoes' primary focus is designing and manufacturing the highest quality footwear, specializing in skateboarding shoes, snowboarding boots, Active Terrain footwear, women's and children's casual footwear, along with complementary apparel. The quality of our products is matched by the integrity of our business practices and employment environment. DC takes pride in its cultivated relationships with the media, suppliers, clients, customers, team riders, and employees. DC Shoes' commitment to excellence deepens with the company's continued expansion.

Key Dates:

1989:: Ken Block begins making screen-printed T-shirts.
1991:: Block teams with Damon Way in developing Eight-ball Clothing.
1992:: Droors jeans brand is launched.
1993:: The company is incorporated as Circle Distribution.
1994:: DC Shoes and Dub outerwear brands are introduced.
1997:: Droors and Dub brands are divested.
1998:: Circle Distribution is renamed DC Shoes, Inc.
2002:: An aborted buyout offer from Billabong spawns lawsuits.
2003:: Drydek-DC Shoes foundation funds the first skate plaza in Kettering, Ohio.

Many municipalities frowned on skaters' use of rails, benches, and other urban props. However, the skate plaza concept encouraged skateboarding in a town square setting. The Rob Dyrdek-DC Shoes Foundation was created to promote the construction of skate plazas, beginning with one in Kettering, Ohio, the hometown of DC Shoes endorser Rob Drydek. In October 2003, the foundation granted the town $250,000 to fund half the cost of building the first skate plaza of its kind.

What can account for DC's explosive growth in the mid-1990s, and its durability as one of the most popular brands in action sports? (According to Board-Trac, DC Shoes was the favorite brand of skateboarders, snowboarders, and surfers in 2002.) DC's close association with top pros has certainly been a factor, as has its knack for staging promotional events. However, the company also creatively met challenges in design, production, distribution, and financing. As one industry insider put it in Agents of Change: "DC was the first skate shoe company to really fire on all cylinders."