Vans Inc.

founded: 1966

Contact Information:

headquarters: 15700 shoemaker ave.
santa fe springs, ca 90670 phone: (562)565-8267 fax: (562)565-8406 url: http://www.vans.com

OVERVIEW

Vans Inc. makes and sells footwear, clothing, and accessories for skateboarders and snowboarders. To target this market, which consists primarily of youths ranging from 10 to 24 years of age, Vans sponsors various skateboarding and snowboarding competitions. In the early 2000s, the firm also began operating several large skateboarding facilities. Since the mid-1990s, manufacturing has taken place primarily in Mexico and South Korea. In addition to its 150 retail outlets, Vans sells its products at department and specialty stores such as Nordstrom's, Sears, JC Penney, and Footlocker, as well as through independent distributors in nearly 50 countries.

COMPANY FINANCES

Sales exceed $100 million for the first time in 1996. By 1999, sales had more than doubled to $205.1 million, and profits had grown to $8.7 million. Sales in 2000 grew 33.3 percent to $273.5 million, while profits grew 38.5 percent to $12.1 million. Earnings per share grew from 64 cents to 84 cents over the same time period. Despite a weakening economy, sales in 2001 grew 24.8 percent to $341.2 million, and profits grew 24 percent to $15 million. Earnings per share reached 99 cents. Sales and profits for Vans began to slow in early 2002.

ANALYSTS' OPINIONS

Although revenues for Vans paled in comparison to the sales secured by Nike and other athletic shoe makers, many analysts believed the firm's success was due to its persistence in targeting a much smaller market than its larger competitors. According to a May 2001 article in Business Week, "by staying true to its base of alternative-sports fanatics, the company has built an intensely loyal customer base." However, other analysts viewed this narrow focus as a liability, reasoning that if the popularity of sports like skateboarding and snowboarding faded, so would sales for Vans.

HISTORY

In the mid-1960s, shoe manufacturer Paul Van Doren decided to create a company that not only manufactured shoes, but also sold them directly to customers. Along with partners Serge D'Elia, Gordy Lee, and Jim Van Doren, Paul Van Doren moved from his East Coast home to Southern California. He oversaw the creation of a factory and a 400-square-foot retail store, which opened for business in March of 1966. The new business was named Van Doren Rubber Co.

As they grew in popularity, Van Doren's shoes came to be known simply as Vans. In 1967, the firm opened a new retail outlet nearly every week. In the early 1970s, skateboarding emerged in California as a popular alternative to surfing, and Vans developed a new shoe that quickly became popular with skateboarders. The firm expanded its skateboard shoe offerings with new color combinations and patterns. In 1979, Vans released a slip-on version of the shoe that became one of the hottest fads in California. The trend spread throughout the United States after Sean Penn, the lead actor in Fast Times at Ridgemont High, wore a pair of checkerboard slip-ons throughout the 1982 hit movie. As a result, department stores, as well independent retailers, began to carry Vans.

By the early 1980s, Vans was also making shoes for the growing numbers of BMX bicyclers. Growing demand prompted Vans to build a new 175,000-square-foot plant in Orange, California. Employees exceeded 1,000 for the first time. The firm began to forge licensing deals with companies who wanted to manufacture things like Vans sunglasses, notebooks, and other products that would appeal to the youth market. Vans also began to expand into shoes for sports like baseball, football, basketball, and soccer, a move that caused production costs to soar. These high costs, coupled with increased competition and pressure to lower prices, eventually forced the firm into Chapter 11 bankruptcy.

Vans emerged from bankruptcy in 1986. Although Vans slip-ons were no longer all the rage, demand for Vans shoes remained strong. Sales reached $50 million in 1987, and the firm returned to profitability. By then, international sales, mainly in Mexico and Europe, accounted for 10 percent of revenues. Despite the fact that nearly all major manufacturers of athletic shoes had shifted production to Asia, Vans remained committed to domestic production. Although this strategy did allow the firm to fulfill orders more quickly, it also added to operating costs.

Investment firm McCown De Leeuw & Co. paid $74.4 million for Vans in 1988. Although Paul Van Doren remained chairman, the firm's new owner hired Richard Leeuwenberg to take over as president and CEO of Vans. Sales reached $70 million in 1990. International sales grew to account for 25 percent of total revenues. Vans completed its initial public offering the following year, offering 4.1 million shares for $14 apiece.

Despite recessionary economic conditions in the early 1990s, sales grew to $91 million, and profits jumped to $6.5 million in 1992. International sales accounted for 32 percent of revenues. Although Vans catalogs showcased more than 200 different shoe styles, the firm's original canvas and rubber shoe continued to garner 50 percent of revenues. Sales and earnings began to wane in 1993, falling to $86.5 million and $2.7 million, respectively. The following year, sales tumbled to $80.5 million, while earnings dropped to $1.4 million. Walter Schoenfeld replaced Leeuwenberg in 1994. Along with moving some of the firm's production to Asia, Schoenfeld also closed several under performing stores. To help strengthen the Vans brand name, he also hired a new team of designers and marketers. In 1995, Vans closed its plant in Orange, California, laying off nearly 1,000 workers. Although some domestic production continued to take place at a plant in Vista, California, the bulk of manufacturing was handled by South Korean factories.

Vans began manufacturing snowboarding boots for the first time in 1995. The firm also diversified into women's and children's lines. With manufacturing being handled by outside contractors, Vans began to focus on its marketing efforts. The firm started to sponsor various skateboarding and snowboarding events. In 1999, Vans built three skateboarding parks in Southern California. The firm began selling its products online in 2000. By the end of 2001, ten skateboarding parks had been completed.

STRATEGY

Paul Van Doren's decision to create a company that combined manufacturing and retailing activities allowed him to not only eliminate the costs of a middleman; it also helped him remain in close contact with customers. This direct contact with clients paid off in the late 1960s when several complaints over cracked soles prompted the firm to revamp its rubber sole design. Realizing that the simple diamond pattern it had used cracked too easily along the edges, the firm began to incorporate vertical lines into the pattern; this design was eventually patented as Vans' waffle sole. In the early 1970s, after skate-boarders began requesting new shoe colors and patterns, Vans hired two professional skateboarders to develop new designs; one of their first creations, a red and blue shoe called the Era, became the best selling shoe among skateboarders.

In the mid-1990s, CEO Gary Schoenfeld worked to change the focus of Vans. After moving manufacturing overseas, Vans was able to turn its attention to strengthening the Vans brand. To this end, the firm became more market-oriented, attempting to pinpoint what its key market, teenagers, wanted, as well as how to best sell to this market. According to Schoenfeld, as quoted in a December 1999 issue of Inc., "You have to strategically commit to the teen market and them tactically find the things that are relevant to teens and cost-effective for the company. Kids don't relate to direct hard-sell advertising. They see through a company that's just spending a lot of money to attract their attention. Our strategy is to ingratiate ourselves more into their lifestyles. Rather than pour money into advertising, we invest in sports and music and entertainment, sponsoring music festivals and events in our core sports."

INFLUENCES

Efforts to diversify into footwear for more mainstream sports in the mid-1980s proved disastrous. Because the firm continued to manufacture its products in the United States, its production costs were much higher than those of competitors who had moved production to Asia. When cheap imitations of Vans shoes began to flood the market, the firm, already struggling to contain costs, was forced to lower prices to compete. Debt mounted, and in 1984, after defaulting on its payment to a creditor, the firm was forced into Chapter 11 bankruptcy reorganization. When Vans emerged from bankruptcy two years later, management resolved to focus only on alternative sports.

CURRENT TRENDS

Skateboarding and snowboarding continued to grow in popularity in the early 2000s, boosting sales for Vans. In fact, according to an American Sports Data super study of Sports Participation, snowboarding and skateboarding both saw participation levels jump by a minimum of 25 percent in 2001. As these once "underground" sports evolved into more mainstream activities, they were considered increasingly viable industries as well. As a result, firms like Vans continued working to position themselves as top selling brands.

FAST FACTS: About Van's Inc.

Ownership: Vans Inc. is a public company traded on the NASDAQ Stock Exchange.

Ticker Symbol: VANS

Officers: Gary H. Schoenfeld, President and CEO; Andrew J. Greenbaum, EVP and CFO; Craig D. Strain, VP Marketing; Joseph D. Giles, VP and CIO

Employees: 1,690

Principal Subsidiary Companies: Vans Inc. operates 150 stores in the United States and Europe, as well as several indoor skateboarding parks.

Chief Competitors: Major rivals of Vans Inc. include athletic shoe makers, such as Converse and Nike. The firm also competes with Billabong International Ltd. and other manufacturers of apparel and gear for skateboarders and snowboarders.

PRODUCTS

Vans sells footwear, clothing, outerwear, gear, and accessories for snowboarders and skateboarders. In the late 1990s, the firm began to manufacture girl's footwear. In 2002, Vans launched two lines of juniors' sportswear. One of the lines, which includes t-shirts and fleece items, is manufactured by Van Pac LLC, a joint venture between Pacific Sunwear and Vans.

CHRONOLOGY: Key Dates for Vans, Inc.

1966:

The first Vans store opens

1979:

Vans creates its slip-on shoe for skateboarders

1984:

Vans files for Chapter 11 bankruptcy

1986:

Vans emerges from bankruptcy

1991:

Vans completes its IPO

1995:

Manufacturing is moved to Asia

1999:

The first Vans skateboarding park is built

FIRST ATTEMPTS AT RETAILING

When Vans opened its first store, three shoe models, ranging in price from $2.49 to $4.99, were on display. Unsure of how many orders it would receive, two of the store's founders, Paul Van Doren and Gordy Lee, had decided to fill its shelves with empty boxes. On the first day of business, 12 customers placed orders for shoes, and Van Doren and Lee asked them to come back a few hours later to retrieve their orders; however, when the customers returned to pick up the newly manufactured shoes, Van Doren and Lee, neither of whom had prior experience with retailing, realized they had no money available to make change. Rather than make the customers wait, Van Doren and Lee gave them the shoes and asked them to return the following day to make payment. Fortunately, all 12 customers complied.

GLOBAL PRESENCE

Van's products are distributed in nearly 50 countries. Most of the firm's manufacturing activities take place in Mexico and South Korea.

SOURCES OF INFORMATION

Bibliography

bowers, katherine. "skating its way to the top." wwd, 7 february 2002.

cole, august. "vans slammed in after-hours trading." cbs.marketwatch.com, 19 december 2001. available at http://www.marketwatch.com.

gonzales, angela. "vans inc. continues skate park expansion, despite economic worries." the business journal - serving phoenix & the valley of the sun, 2 november 2001.

"still awesome after all these years." inc., december 1999.

vans inc. home page, 2002. available at http://www.vans.com.

weintraub, arlene. "vans: chairman of the board." business week, 28 may 2001. available at http://www.businessweek.com

For an annual report:

write: vans inc., 15700 shoemaker ave., santa fe springs, ca 90670

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. vans inc.'s primary sics are:

3021 rubber and plastics footwear

3143 men's footwear, except athletic

3144 women's footwear, except athletic

5661 shoe stores

also investigate companies by their north american industrial classification system codes, also known as naics codes. vans inc.'s primary naics codes are:

316211 rubber and plastics footwear manufacturing

316213 men's footwear (except athletic) manufacturing

316214 women's footwear (except athletic) manufacturing