Can a Golf Shoe Help GEOX Beat the Recession?

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The GEOX Net System men's golf shoe.

At a time when consumers are cutting back on discretionary purchases, you'd think that new footwear would be sacrificed for savings. You'd also reason that expensive forms of recreation might also see a downturn. Golf, for example, is a game that more Americans are learning to live without.

Given these dynamics, wouldn't this be the absolute worst time for a company to enter a business that combines two ailing industries: namely, the golf shoe business? Not so, says GEOX, the fast-growing Italian shoe company whose breathable, casual footwear have developed a loyal following around the globe. On Wednesday April 1st, GEOX announced that it's entering the golf game; the company is launching its first line of shoes for the weekend duffers. GEOX is betting that its "NET System Technology," which utilizes an actual net inside the shoe's sole to help keep a golfer's foot dry, will attract enough fans to continue the company's growth. (See pictures of terrible golf fashion.)

"We had decided to launch before the crisis started, and we continued along our path," says Mario Polegato, the chairman and founder of GEOX, a $1.2 billion company (at current exchange rates) whose shares are listed on the Milan Stock Exchange. "In this economic situation, the best thing for a company is to offer innovative products. It's the only way out of the crisis." (See which businesses are bucking the recession.)

Polegato's timing might not be as bad as it seems. While footwear in general, and especially luxury shoes, has suffered in the recession, athletic shoes have not taken as hard a hit. In fact, after the $17.5 billion U.S. athletic footwear market saw flat sales in '08, sneakers are actually up 6% so far this year, according to SportsOneSource, a research firm. Further, while the overall golf business is stuck in the rough — U.S. equipment sales, for example, have dropped 9% this year — spikes have sold relatively well. In the United States, the $500 million golf shoe market was actually up 3% in 2008, and it has risen 1% this year.

Why have golf shoes proven recession resistant? For one, all that walking around in the grass (and for many, the sand) really wears down your spikes. "Golf is very hard on shoes," says Matt Powell, an analyst at SportsOneSource. "Grass creeps in them, they get wet, and they can even get moldy. It's easier to play in an old golf shirt than play in old, rotten shoes." While you can send weary brown shoes to the repair shop, it's harder to fix up a pair of sneakers. Plus, consumers might be trading down from expensive golf equipment to shoes. Instead of splurging on a $700 set of new clubs, which rarely wear out to the point you can't use them, golfers can buy new shoes for a fraction of that cost. This way, they feel like they're saving money while getting a necessary upgrade. (See pictures of shoes worn by Olympians.)

Despite this favorable environment for golf shoes, GEOX's success is no gimme. First, the shoes are expensive, ranging from $160-200. Some golf shoes in the market cost even more, but that's still a steep price during down times. Plus, golf is a crowded marketplace; in the U.S., for example, Nike owns 56% of the market. With Tiger Woods returning to the course, in his usual Swoosh-clad clothes, an upstart like GEOX is unlikely to make a serious dent. "It's not like the industry is crying out for a new brand or a new idea," says Powell. "It will be a very difficult challenge for GEOX."

The Italian shoemaker, however, could be the company that exceeds expectations. After all, it's been doing just that throughout its brief history. Polegato started the company in 1995, six years after an-hour long walk through the Reno, Nev., desert compelled him to take out a Swiss army knife and poke holes in the rubber soles. He wanted to know if the holes would increase the ventilation in his sweaty feet; turns out they did. Polegato was in Reno to promote his family's Northern Italian wineries, but upon returning to Italy he pursued a ventilation technology (no more Swiss Army knives) that could start a thriving business. (See 25 people to blame for the financial crisis.)

He now has the top-selling shoe brand in Italy, and GEOX is a rising star in the global marketplace. Between 2001 and 2008, the company's net sales increased from $195 million to $1.2 billion. Profits jumped from $9.5 million to $163 million. More recently, however, GEOX hasn't escaped the slowdown. After a decade of double-digit annual profit growth, net income flattened out in 2008. The stock has dropped 54% over the past year. "At the moment, the shoes business is very difficult," says Polegato. "I believe, however, that GEOX is in a great situation, because we can mix technology and style."

Can golf stop the slump? Polegato insists that his customers have asked that GEOX create a comfy golf shoe. "Golf is a perfect environment for GEOX technology," he says. "You walk long hours, often on a damp surface, and in warm if not hot climates. Why suffer with your feet? In the third millennium, it is impossible that people still suffer from such a basic problem as sweaty, smelly feet." Right on, Mario. The problem for GEOX, however, is that the world's economy may stink even worse.

See sports pictures taken by Walter Iooss.

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