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SOOTHING SOLES

THE WALKING COMPANY BROADENS ITS APPEAL BY EXPANDING ITS DEFINITION OF COMFORT

By Jesse Serwer

The Walking Company's 2003 bankruptcy filing seemed to suggest that demand for its particular offerings was too frail to support a national chain. The Lincolnton, N.C.–based comfort footwear retailer had rocketed from just 20 stores in 1995 to about 150 only a few years later. By the time of the bankruptcy, the chain had shrunk back down to 73 stores.

Big Dog Holdings, the Santa Barbara, Calif.–based apparel and accessories company that acquired Walking Company in March 2004 for $19 million, is upbeat about the comfort footwear model. Big Dog attributed Walking Company's failure to operational inefficiencies and real-estate-related missteps, and not to the niche itself.

“The fact [that] there weren't any national chains in the market exclusively retailing comfort footwear was very attractive to us,” said Lee Cox, who is senior vice president of retail for both Big Dog and Walking Company. “There were a lot of independent stores and small chains, as well as places like Dillard's and Nordstrom, who showed small pieces of the comfort world and don't make a big statement about it, because they also sell fashion and athletic and so on. But there was no other national retailer that just focused on this sector.”

Fred Kayne, acting chairman of Big Dog, and Andrew Feshbach, the firm's CEO, acquired a bankrupt novelty T-shirt retailer called Big Dogs in 1990 for $3 million. By 1997 they had made it over as a public company posting $100 million in annual sales. Hoping to achieve similar success with their new purchase, the principals reworked Walking Company's store design and set about to redefine the meaning of comfort footwear, which had always conjured up images of senior citizens in decidedly unfashionable shoes.

“The industry has evolved from what I would call ultimate-comfort footwear for an older clientele to include pieces of the outdoor-footwear market: shoes that are comfortable to walk in whether you're on the street or a trail,” said Cox. “We saw right away that we could attract a wider demographic and bring a broader base into our store by opening up the meaning of comfort and marketing more interestingly to a broader audience.”

Since the acquisition, Walking Company has posted same-store sales increases in every quarter, often in the double digits (third-quarter 2007 numbers rose 9.6 percent year on year). The chain had not released year-end 2007 sales figures at press time, but Walking Company did enjoy a 56 percent increase in net sales in 2006, to $135.7 million, from $87 million in 2005.

That translated into considerable, though measured, unit growth, with about 100 new stores opening since the acquisition. Following a busy stretch in November and December in which 15 stores opened in markets across the country, the chain now operates 186 stores across 38 states. Meanwhile, the chain has set about acquiring the few competitors there are — mainly regional names like Steve's Shoes, a 45-unit chain that operated in the Midwest and the Southwest; Overland Trading; or Sole Outdoors. The acquisition of Natural Comfort, an eight-unit chain on Florida's west coast, was completed in mid-January.

“We plan on being at 300 stores by the end of 2010,” Cox said. These will primarily be on in-fill sites, he says, as most major markets are accounted for. Meanwhile, the company has forged partnerships with Clark's, Dansko, Ecco, Uggs and other comfort footwear makers.

“Those relationships mean we've been able to get exclusive styles, colors and assortments, and also get key products into our stores prior to any other retailer,” Cox said. “Our other competition are independents who, quite frankly, don't have the resources to market nationally and carry the broad assortment that we offer.”

Cox says Walking Company caters to consumers between 35 and 65, with reported household income in excess of $125,000 a year. The chain's ticket price is about $110 on average. “When we acquired the Walking Company, it was about a 50-50 [ratio between] men's and women's shoes,” Cox said. “Since we've evolved the merchandise mix, the store design and the marketing efforts, it's now about 70-30, women's to men's.”

The focus may have shifted toward women's shoes, but Walking Company helps fill a void for men's shoe retailers, at least at Macerich Co. centers, according to Randy Brant, Macerich's executive vice president of real estate. Macerich has 16 Walking Company stores in its portfolio. “It's difficult for us to find footwear retailers that appeal to men, other than athletic stores like Foot Locker,” said Brant. “Relative to most other shoe stores I see, they have a lot to offer for men.”

Currently, all Walking Company stores but nine are located at indoor, regional malls. “Typically, we target malls that perform at over $400 per square foot,” Cox said.

The company has only lately begun testing the waters in lifestyle centers — seven of these stores at present — and it also has two street stores, one in Seattle and the other in Washington's fashionable Georgetown district. Almost all Walking Company stores measure between 1,200 and 1,600 square feet. Its preferred co-tenants include chains with a diverse customer base, such as Apple, Chico's and Coach. “Because we are a unique fit to the mix in any mall, we have found success next to a number of different combinations,” Cox said. “So I look at the location in the mall [rather than] the mix.

Walking Company has no stores abroad right now, but Cox says the company is looking at sites in Canada. The store's next phase could involve a move into airports. “Travel is a big component of our business,” Cox said. “Our customer base has an active lifestyle and is looking for different comfort shoes in each category to take on their trips, [or] shoes that serve two or three functions. We have found that a person who travels wants comfortable shoes to walk and tour in and to go out at night, so there's crossover.”

Walking Company has proved to be such a significant growth vehicle for Big Dog that Feshbach has announced plans to change the name to The Walking Company Holdings sometime this year. “This change simply reflects the changing dynamic of our company, which has been going on for some time now,” Feshbach said in a press release. “Our continuing success in expanding The Walking Company has resulted in it outstripping Big Dogs, and we see that continuing in the future.”