City’s other sneaker firm bets on retro

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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.”

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