How Converse went from bankruptcy to a $1.4 billion business

How Converse went from bankruptcy to a $1.4 billion business

By Laura Lorenzetti September 28, 2013

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As its parent company commands, Converse is just doing it. The 105-year-old brand has grown at breakneck pace since Nike rescued the company in 2003, two years after it filed for bankruptcy. Since its cultural heyday in the ’80s, the hip sneaker has experienced a rebirth. On Thursday, Converse posted an 18% increase in revenue over the past three months, a shining star on an overall impressive balance sheet for Nike. From now on Converse will report its earnings separately, heralding the brand’s standalone success. In 2002, the flailing company reported just $205 million in revenue. Since, Nike has transformed the brand into a $1.4 billion business—and this year’s revenue is on pace to surpass that number. Converse has seen the strongest growth in the North America, China and the UK, where it’s made significant investments over the past several years. How was Converse able to turn around?

It transformed a basic canvas sneaker into a designer’s canvas. From black leather-studded sneakers by John Varvatos to woolly bright hightops by Hudson Bay, there are endless options across the fashion spectrum.

The original Converse All Star, created for basketball players, was the ultimate sports sneaker in the 1970s. In the ’80s, Converse became the quintessential casual footwear before the sneakers were made famous by musicians like Kurt Cobain in the early ’90s. The Converse website describes this transition best: “We started on the court and got adopted on the street.”

Converse leveraged this change at the right moment by dropping its original all-American message in favor of an image that would appeal to millennials: individuality and independence. Their 2008 “Connectivity Campaign” played up the brand’s counter-cultural appeal, featuring images of rebellious icons of past decades, such as Brit-bad boy Sid Vicious, and American idols Janis Joplin, James Dean and Billie Joe Armstrong. The campaign extended globally into 75 countries, each customized with area-specific celebrities, and helped the brand post a 29% increase in year-over-year revenue.

“Our whole mission is to inspire originality and be an advocate and catalyst for creativity,” said Converse CMO Geoff Cottrill, in an interview with AdWeek.

If the recent quarter’s revenue is any indication, the latest ad campaign,”Shoes are boring. Wear sneakers,” is maintaining that edgy appeal.

The consistent, targeted approach to advertising, and the addition of new retail stores, have helped the sneakers gain a foothold around the world. Nike reported that 42% of sales, including Converse, were driven by the US market, leaving huge growth potential for Converse internationally. Nike opened its first specialty store in Beijing, which featured some of the city’s hippest icons: indie musician Peng Leidesigner Vega Wang, and Chinese top model Bonnie Chen.

But Converse All Stars are 11% more expensive today than they were two years ago. They face growing competition from both Vans and Keds, which have lower price points. Consumers haven’t pushed back yet and likely won’t as long as Converse remains the coolest kid on the block.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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