City’s other sneaker firm bets on retro

FILA, U.S. corporate team that launched a hugely successful basketball category. But the brand slowly lost relevance and money, and Fila was sold to a Korean company, restructured and reinvented. Under its current model, license holders around the world design and make Fila products for their markets. Fila North America, still based in Sparks, works closely with retailers such as Barneys New York and Urban Outfitters to create exclusive products for their stores.

Momentum has been building. Celebrities such as actress Dakota Fanning and singer Ne-Yo have been spotted sporting an updated version of Fila’s Disrupter sneakers. The new take on the popular chunky shoe from Fila’s 1990s archives was picked in October as the Footwear News shoe of the year. The brand raised its profile further in September by staging its first runway show at Milan Fashion Week.

The company has even signed new lifetime deals with former athlete endorsers, including former NBA star and basketball Hall of Famer Grant Hill. It also recently signed rising U.S. tennis star Sofia Kenin.

In many ways, Fila shares traits with Baltimore’s bigger and better-known shoe brand, Under Armour. They both make athletic shirts and shoes and are recognized globally. Under Armour is homegrown and Baltimore-based, while Fila’s in Baltimore County.

But they don’t necessarily see each other as direct rivals. With nearly $5 billion in sales, Under Armour emphasizes performance, while the much smaller Fila sees itself as a fashion brand, especially in the United States. Fila is largely a shoe company, though apparel sales have grown recently, to 30 percent of business. Apparel makes up the bulk of business for Under Armour, but it’s counting on its footwear segment for growth. Fila markets itself as a niche brand, while Under Armour competes with Nike.

“Fila started life as a sports brand with a fashion sensibility and has morphed in most parts of the world into a fashion brand with a sports sensibility,” said Jennifer O. Estabrook, Fila North America’s chief operating officer.

The brand’s lifestyle focus and low profile work in its favor, Powell said. Fila is a relatively small player in U.S. footwear, accounting for just 1.2 percent of footwear retail sales. Under Armour has 3.4 percent. But Fila’s U.S. footwear sales are booming, growing more than 25 percent in the third quarter, Powell estimates.

“Small is the new big,” Powell said. “Consumers are looking for unique brands that their friends don’t have, and this falls in that camp.”

Fila Korea’s global revenue grew 28 percent to 725.9 billion won, roughly $640 million, in the most recent quarter, while Fila USA sales jumped more than 64 percent to $110.2 million.

Estabrook credits the growth to Fila’s throwback shoes and “heritage” collection of ’90s-inspired apparel.

Demand has been so strong the company doubled the size of its distribution warehouse in Curtis Bay’s Brandon Woods Industrial Business Park in June to more than 731,000 square feet, renewing its lease and expanding into space next door formerly occupied by Under Armour.

It’s actively hiring at the warehouse, where it now employs 101 full-time employees. Another 56 work full time in the Sparks headquarters in finance, information technology, credit and other back-of-house operations.

Fila’s fortunes began to improve a couple of years ago after decades of weathering the ups and downs of the fashion industry.

Founded as a textile maker by the Fila brothers in Biella, Italy, in 1911, Fila became known in the 1970s for outfitting tennis players. The 1975 signing of Swedish player Bjorn Borg helped launch the brand into tracksuits and other sportswear.

Fila’s first shoes were sold in the United States in the 1980s after Baltimore sneaker distributor Homer Altice bought a footwear sales license from the Italian company. Fila later bought the license back but kept the Sparks headquarters, which employed several hundred people at its peak.

By the 1990s, Nike and its Air Jordans had become a force. The then subsidiary of Fila Holding SpA sought to boost its share of the U.S. sneaker market by establishing itself in performance footwear. In 1994, Fila beat out Nike to sign Duke University basketball star Hill to a multimillion-dollar endorsement contract. The brand reportedly sold more than 1.5 million pairs of the first shoe in Hill’s signature line. Three years later, Fila Holdings signed a seven-year, $80 million contract with the Detroit Pistons player. It was at the time one of the most lucrative sports endorsement deals in history.

“Fila was an emerging brand in footwear, and we needed a guy like Grant,” said Howe Burch, a former Fila senior vice president for sports marketing who worked at the company from 1993 to 2004 and led the effort to land Hill. “He was the tipping point to get credibility in footwear. The impact was enormous. … He put Fila on the map.”

Burch recalls how tens of thousands of fans showed up at Fila’s Grant Hill global tours in Europe, South America and the Philippines.

“He was going to be the next Michael Jordan,” said Burch, now president of Baltimore-based advertising and marketing firm TBC. “But he got hurt, and that never developed. The brand experienced meteoric growth, and then it hit a wall. It lost favor and fell out of fashion.”

Estabrook joined Fila as a vice president and general counsel in 2005 after the brand had been sold to private equity firm Cerberus Capital Management. Cerberus sold most of the company at auction in March 2007 to Gene Yoon, who had been president of Fila Korea, and Fila USA President Jon Epstein. At the time, Fila USA was losing $55 million a year.

The company restructured as two directly owned and operated businesses in Korea and the U.S. They award long-term licenses to entrepreneurs in more than 40 local markets. That model and an entry into middle-market retailers such as Kohl’s helped spark a recovery.

Then growth took off, said Estabrook, who in 2015 became chief operating officer of the U.S.-based Fila, which maintains executive offices in New York in addition to its headquarters in Sparks.

“We just hit the trend,” she said, crediting Epstein’s vision. “It was a combination of retro coming in, having a deep history in the ’90s, and having a president who is a commercial genius and who could smell what the market wanted.”

His idea was to tailor products for specific retailers that would help them and the brand thrive, starting with a few apparel pieces at Urban Outfitters. Fila also has worked with Barneys, Bloomingdales, Foot Locker and Nordstrom.

“The retailers who are going to survive are the ones who can offer a point of difference from their competitors,” Estabrook said. “If you can give them products or a collaboration ... that is suitable to their customers, it helps them compete. It allows them to create a story and bring people into their stores.”

“The millennials want to be engaged by the brand,” she said. “They want things that are new, not the same old, same old.”

And this year, they want shoes that are “ugly,” an attribute that brought Fila recognition from Footwear News. Past shoe-of-the-year awards have gone to high-profile sneakers designed by Kanye West, Rihanna and Virgil Abloh, founder of the fashion label Off-White.

“Love it or hate, 2018 was the year of the chunky sneaker, and the Fila Disruptor 2 was not just on-trend but a knockout version of it,” the publication said. “With its sawtooth sole and subtle detailing, it evolved the dad look.”

Fila can’t make the shoes fast enough, Estabrook said.

“Ugly shoes are in, and it’s incredibly comfortable, and it’s new and it’s different,” said Estabrook, who has pairs in silver, all-white, gray fabric and black patent leather.

At $65 to $100 a pair, she added, “they’re accessible. People just love them.”

Estabrook expects that the retro ’90s trend, like most trends, has additional mileage but won’t last forever, and she believes demand will heat up eventually for performance-oriented sports apparel and shoes.

When it does, she said, Fila will be well positioned with its tennis collection, and will begin to regain traction in basketball. As part of the Hill deal, the brand launched a special edition Grant Hill high-top sneaker this month tied to Hill’s Hall of Fame inauguration.

“What is unique about the Fila brand is that we are authentic in both worlds,” Estabrook said. “And that is a tremendous advantage to us to weather business cycles and to weather fashion cycles.”