The L.A. Gear Story

L.A. Gear. Just the name brings back memories of pumps, neon lights and the personification of the late 80s. It teetered on the cusp of vibrancy before the doom and gloom of the depressing nineties shrouded the positive vibes of the preceding decade. L.A. Gear is the story of a quick, dramatic rise followed by an incredible, sudden fall. And in spite of bankruptcy and burns it suffered in the mid to late ‘90s, it has managed to survive in some ways.

Robert Greenberg initially began as a hairdresser before selling such things as wigs and electric tweezers. Greenberg credited his spirit to his father and Robert said that he always wanted to be the president of a company on the New York Stock Exchange.

By 1982 Greenberg opened his own store where he sold name brand merchandise. In a Company Histories article, they mentioned that “…Greenberg launched the L.A. Gear clothing label [in his first store].” In the same article it’s been said that the brand name initially came from a saleswoman stating that all her shirts were “’real L.A. gear.’” A saleswoman wrote it down for a contest Greenberg was having and upon receiving the name, he threw it away. After taking the night to sleep on it, he woke up and decided that L.A. Gear was the name for his company.

In 1985 L.A. Gear was involved with athletic shoes, specifically targeting young females. According to Company Histories, sales increased almost overnight “…from $200,000 at the beginning of the year to $1.8 million at the end of 1985.” It didn’t take long for Greenberg to make his dream come true as he took his company public in 1986. Profits continued to pour in as sales increased by 200% in that year and doubled in 1987. L.A. Gear continued to drive forward, becoming the best performing stock on the NYSE in 1989; by 1990, according to Company Histories, L.A. Gear reached their pinnacle of sales at $818.8 million. It had become the third largest company in the athletic shoe world.

By 1989, however, L.A. Gear still had trouble with the men’s market. Company Histories states that “…men’s athletic shoes accounted for 70 percent of L.A. Gear’s competitors’ total sales but only 20 percent of L.A. Gear’s total sales.” If L.A. Gear wanted to maximize more of the market, it was going to have to go after men. However, as it’s been noted so many times throughout history, on average, men pay less attention to fashion than women. And fashion is what the L.A. Gear brand was built upon.

While L.A. Gear’s profits were never higher by 1990, things had begun to change. Their stock had risen incredibly from $3 in 1986 to a respectable $50 in 1990. However, the way 1990 ended was significantly different from the way it began. The Deadly History of LA Lights by Mike Wehner cited the infamous shoe incident when on a nationally televised game, a pair of L.A. Gear shoes worn by a Marquette University basketball player “disintegrated on the court.” Their problems persisted.

The endorsements were part of the problem as well, along with poor timing. First, L.A. Gear signed Kareem Abdul-Jabbar. L.A. Gear was supposed to be on the cutting edge and they signed a basketball player who was on the verge of retirement. The company then went on to sign Michael Jackson. The signature with Jackson was supposed to coincide with the release of Michael Jackson’s Greatest Hits album which never materialized. Coincidentally, Jackson’s commercials was the first time he had ever touched a product. It’s surprising to know that with all the years he worked with Pepsi, he never touched a can. But he wore L.A. Gear shoes.

In an L.A. Times article by Horovitz, the economics of the company was clarified. By late June 1990 there was a 36% drop in second-quarter profit despite a 33% increase in sales over the same quarter of the previous year. The stock went from $50.375 to $20.75. An incredible fall.

But L.A. Gear still tried to turn things around. Recognizing that men’s fashion was nearly an oxymoron during this time, the company released the Catapult basketball shoe. Company Histories cites that it cost $100 and “…featured a fiberglass and graphite heel supporting an air cushion, [which] was marketed without the L.A. Gear brand name to ‘distance Catapult from LA. Gear’s young, low-price image.’” After the Marquette basketball incident, the company vowed to improve their product.

It was at this time that L.A. Gear ran into legal trouble against both Reebok and Nike. The former for infringing on Reebok’s Pump (of which L.A. Gear paid $1 million and licensing fees) and the latter because Nike claimed the Catapult infringed on their “spring moderator” technology. Through these troubling times, L.A. Gear implemented one thing it wasn’t sued for: L.A. Lights.

But it wasn’t enough to save L.A. Gear.

During December of 1990, a CNN article articulated that L.A. Gear “…received a $360 million dollar line of credit from a consortium led by Bank of America.” A stipulation existed that would eliminate the loan should L.A. Gear lose money in any quarter. L.A. Gear suffered a loss in the last quarter of 1990. Searching for a way out, they had to sell a significant portion of their stakes to Trefoil Capital in 1991 for $100 million, according to Sloan. Monetary issues continued and after L.A. Gear couldn’t afford to pay dividends to Trefoil Capital for three straight quarters, Trefoil Capital began to make changes. Mark Goldston (a former Reebok marketing executive) was put in place and a slew of other management alterations were made. Most notably, Robert Greenberg was heading back to the job of designing shoes where he vowed to work without pay until the company made money. By the end of the year, Company Histories reports, “…L.A. Gear’s market share had dropped to eight percent from its high off 11.8 percent in 1990.” It is odd that a man who built a company on style and the movement of pop culture didn’t see the cultural changes in the air.

With the changes in management, so too, were there changes in how the brand would market itself. The advertising budget was cut and only three celebrities (Hakeem Olajuwon, Joe Montana and Karl Malone) would be kept online to promote the men’s sports shoe.

Due to the damaged name and the lower cost, L.A. Gear had begun to have worsening relationships with retailers. According to Company Histories, “Bad marketing decisions, coupled with rebellious retailers who began to refuse L.A. Gear shelf space contributed to a net loss of $66.2 million for the company in 1991.” It was going to be difficult for L.A. Gear to recover from some of their self-inflicted wounds.

By early 1992 Greenberg resigned. In Company Histories, they cite Los Angeles Magazine where he said, “I can now devote more time to my family.” That’s certainly one way to look at it. But after he left, Stanley Gold was placed as the CEO by Trefoil. By this time, L.A. Gear had dropped from third to fourth place in footwear. Company Histories adds, “Scattered corporate offices were consolidated in a new Santa Monica, California, headquarters… To further reduce costs, the company closed its apparel production and marketing facilities, opting to license its name to a few garment-making companies instead.” By the end of the year, L.A. Gear staff had been cut by 45 percent.

There were still upsides. As Deadly History states, L.A. Gear sold more than five million pairs of the light up shoes in over a 12-month cycle. It’s added, “For a solid two years, lit-up shoes were the hottest things in kids fashion.” Indeed, those things were everywhere.

But by 1993, aside from the lights, little was going well. Grunge music and style was moving into the dark light in a big way and neon, flash and girls with big poofy blonde hair were on their way out. Taking a look at Throwback Thursday’s article, “Within a year the company began restricting access to the shoes, returning to higher-end department stores… By doing this L.A. Gear hoped to gain more upscale clientele for their shoes. However, in doing so the company was so desperate to sell the remaining inventory that L.A. Gear shoes began showing up at flea markets, swap meets, and supermarkets.” 1994 was going to be worse with the arrival of mercury.

In order for the lights to light up as they did in L.A. Gear’s specific shoes, they used the toxic metal of mercury. While it was in such small amounts that it wasn’t considered a health risk, the mercury was considered an environmental risk because the shoes were likely to end up somewhere in a landfill. According to the Baltimore Sun, Minnesota banned sales and distribution of L.A. Gear’s My Li’l Lights and LA Lights shoes because they contained mercury, which was illegal to throw away.

In August 1994 L.A. Gear paid $70,000 to help recycle the shoes and offered all customers to call for a postage-free mailer to send the shoes back to the company for recycling and the shoes were going to be donated to charity if they were still usable after the mercury had been removed. While this was terrible news, sales were seemingly unaffected. At least not immediately.

Since L.A. Gear was no longer using mercury, they instead designed a different way to make the shoes light up. They began using ball bearings and a switch to activate the lights but this came with its own problems. Sometimes, the switch would end up getting stuck in an “on” position which would obliterate the battery within the shoe and obviously the lights wouldn’t light up after a while.

At this time, Goldston stepped down and was replaced by William L. Benford. As Company Histories states, L.A. Gear signed an agreement with Wal-Mart stores which “…[Wal-Mart] would buy at least $80 million of L.A. Gear shoes per year over a three-year period starting in 1995.” This change in leadership also seems to have initiated a change in company strategy for no longer did it seem L.A. Gear was interested in appealing to a higher-end clientele. Lower-end L.A. Gear merchandise was now in Wal-Mart. Furthermore, L.A. Gear was peeling away from the men’s market and going back to its roots of focusing on women and children.

By late 1995 L.A. Gear continued to lose money. They closed more retail stores and again slashed their workforce. By November 1995 Company Histories mentions that L.A. Gear posted a $51.4 million loss on sales. By this point, L.A. Gear had fallen to sixth place in the shoe market when just a few years before it had been third.

And the bad times continued through 1996. L.A. Gear cut more jobs as demand for its lights began to fade. Denise Gellene wrote in her article, “…prices on older styles have been slashed by $10 to $18, retailers say, so that most L.A. Gear shoes go for less than $50.” Within the article was a Sears, Roebuck & Co. executive, Susan Hopper, who was quoted as saying, “Anything over $50 is difficult for L.A. Gear.” People didn’t see L.A. Gear as a premium brand.

In an odd move, L.A. Gear President, Benford, stated that the company was going to introduce a “wide-soled women’s sneaker” with a $60 price tag. When a president states that he wants to sell something for $60 and a buyer says that anything over $50 would be “difficult”, it seems there’s a disconnect within the company.

In late 1997 Trefoil Capital decided to sell its 42% stake in L.A. Gear. Company Histories cites it as, “…accepting just $228,000 from PCH Investments, a Los Angeles-based investment partnership headed by Steven Jackson and Richard Hollander.” Immediately six of the eight other directors resigned.

By November, in L.A. Gear Near Bankruptcy?, it stated that the company was hinting that it could seek Chapter 11 bankruptcy protection. It further noted that the stock had dropped about 64% in the past year from a high of 2 to less than 1. Not only did the company hint at bankruptcy, they eventually went through with it.

After bankruptcy L.A. Gear reorganized itself again. New managers came into the fold and the company became a licensor of the L.A. Gear brand. Gone also were the days of the New York Stock Exchange and it became a private company controlled by PCH and its bondholders. According to Company Histories, the workforce now only had ten employees.

In the efforts to revitalize the company, they went back to work in the shoe business. Company Histories writes, “In the spring of 1999 ACI rolled out a new line of L.A. Gear footware, including women’s and men’s casual athletic shoes and children’s L.A. Lights shoes.” L.A. Gear would go on to receive a percentage of the resulting sales. The company added that they would stay away from discount stores like Wal-Mart and Target.

But L.A. Gear would never achieve what the name had once been. By 2004 the name was launched again and featured the Catapult line. Throwback Thursday notes that Los Angeles Laker Luke Walton was signed to be a spokesman and Ron Artest was endorsed but he was dropped after a brawl between the Pacers and the Pistons. Choosing poor endorsements seemed to follow all of L.A. Gear’s old products.

L.A. Gear continued to slowly bring itself back with the L.A. Lites in 2009 and has since rebranded itself again in 2015 and it now goes on even to this today. Although it seems to have shown up more in litigation than on people’s feet. According to a Los Angeles Times article by Nathan Fenno, L.A. Gear has made itself known especially in the sports world as L.A. Gear attempted to sue the L.A. Rams, the L.A. Chargers, the Lakers in 2014 and the Clippers in 2016.

After leaving L.A. Gear in 1992, Robert Greenberg created another shoe brand, Skechers. As of 2018 it was the third largest athletic footwear brand in the Untied States.

While L.A. Gear is unlikely to ever recover what it has once lost, it’ll always have a nostalgic moment in the minds of the children and young adults whether its the pumps, the lights, the commercials or the era.

Works Cited

Athletic Footwear Industry.” The NPD Group, 6 Feb. 2018, http://www.npd.com/wps/portal/npd/us/news/press-releases/2018/us-athletic-footwear-industry-sales-grew-2-percent-to-19-6-billion-in-2017-npd-group-reports/

Barrios, Joseph. “Shoes Lighted by Toxic Mercury Are Phased Out.” Baltimoresun.com, 8 August, 1994, http://www.baltimoresun.com/news/bs-xpm-1994-08-08-1994220012-story.html

Company-Histories.com. “L.A. Gear, Inc. — Company History“, company-histories.com/LA-Gear-Inc-Company-History.html

Fenno, N. (2018). ‘L.A. Gear challenges trademark applications of Rams and Chargers, complaining about their use of “L.A.”’ Los Angeles Times. 10 September. Available at: https://www.latimes.com/sports/sportsnow/la-sp-lagear-rams-chargers-20180907-story.html (Accessed: 24 September 2020).

Gellene, Denise. “Out of Step : L.A. Gear, in Athletic Shoe Race, Seeks to Regain Foothold.” Los Angeles Times, 20 Sept. 1996, http://www.latimes.com/archives/la-xpm-1996-09-20-fi-45765-story.html

History of LA Gear.” Did You Know Fashion, didyouknowfashion.com/history-of-la-gear/

Horovitz, Bruce. “Michael Jackson Starts Selling L.A. Gear’s Soles.” Los Angeles Times, Los Angeles Times, 6 Aug. 1990, http://www.latimes.com/archives/la-xpm-1990-08-06-fi-189-story.html

L.A. Gear near Bankruptcy?” CNNMoney, Cable News Network, 24 Nov. 1997, money.cnn.com/1997/11/24/companies/lagear/

Lev, Michael. “Shares of L.A. Gear Drop on News of Loss.” The New York Times, The New York Times, 22 Jan. 1991, http://www.nytimes.com/1991/01/22/business/company-news-shares-of-la-gear-drop-on-news-of-loss.html?auth=login-email

Sloan, J. (2003). ‘Waiting For The Other Shoe To Drop His First Company, L.A. Gear, Grew to $820 Million in Sales in Just Seven Years, Then Fell Apart. His Second, Skechers, Got off to a Fast Start Too, but Has Stumbled Lately. For Robert Greenberg, It’s Time to Prove the Skeptics Wrong.’ CNN Money. 31 March. Available at: https://money.cnn.com/magazines/fortune/fortune_archive/2003/03/31/340090/

Wehner, Mike. “The Deadly History of L.A. Lights.” The Week – All You Need to Know about Everything That Matters, The Week, 21 Sept. 2015, theweek.com/articles/577294/deadly-history-la-lights

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