L.A. Gear

L.A. Gear is a California corporation originally organized on February 7, 1979. The company is a holding company that through its principal subsidiary, L.A. Gear California, Inc., designs, develops, and markets a broad range of quality athletic and lifestyle footwear for adults and children (USSEC 10K, 1995, 4). The primary selling point, domestically and internationally, has been the concept of lifestyle, which in the beginning was more restricted to domestic niche markets. Had L.A. Gear stayed with its original marketing philosophy, a competitive return for the parent company may have come easier. Since 1990, a winning performance has eluded L.A. Gear. The intensity of the competition faced by L.A. Gear, as well as the rapid changes in fashion, technology and consumer preferences, conceivably led L.A. Gear away from its fashion focus and turned its attention on men's athletic shoes (Gellene, 1995, 1). With L.A. Gear's attention turned away from its market of origin, sales of the company's women's "work-out" style shoes fell 43% between 1992 and 1994 (Gellene, 1995, 1).

According to a report published in Sporting Goods Intelligence on December 9, 1994, Nike and Reebok collectively had over 50% of the United States' branded athletic footwear in 1994, while L.A. Gear ranked fourth with an approximate 5% domestic market share (USSEC 10K, 1995, 9). The domestic focus of the parent company seemingly had to shift to other strategies to ensure an eventual lon

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ies, but L.A. Gear has not suffered significant adverse effects as a result of the quotas to date. In August of 1994 Mexico modified procedural agreements for non-GATT countries that imported footwear into Mexico. Mexico has instituted a graduated-price index that allows certain kinds of L.A. Gear shoes to be sold without import duties attached (USSEC 10K, 1995, 13-14). When evaluating which international financial market returns the most profits to L.A. Gear one has to consider the difference between gross returns through independent and wholly owned distributorships, currency rate exchanges, and the costs of doing business in foreign countries. The Company's gross margin on international sales for 1993 increased to 25.6% from 17.7% in the prior year primarily due to the inclusion of the sales of the L.A. Gear's newly acquired foreign subsidiaries in Europe (L.A. Gear, 1995, 15) There was a further increase in gross margin but a downturn in 1995 (Merrill Lynch, 1996, 6). In prior years, products were sold primarily to distributors at a stated margin over L.A. Gear's factory purchase price and L.A. Gear exercised little control over the pricing for resale by the distributor (L.A. Gear, 1995, 15). Because of relative stab

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