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Saucony Inc.

Saucony Inc.

191 Spring Street
Lexington, Massachusetts 02420
U.S.A.
Telephone: (617) 824-6000
Fax: (617) 824-6549
Web site: http://www.saucony.com

Public Company
Incorporated:
1910 as A.R. Hyde and Sons
Employees: 343
Sales: $166.2 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbols: SCNYA SCNYB
NAIC: 316211 Rubber and Plastics Footwear Manufacturing; 451110 Sporting Goods Stores

Saucony Inc. established its name as a designer, manufacturer, and marketer for high performance running shoes. The company also sells shoes for walking, cross-training, and hiking, as well as shoes for coaches and officials under the Spot-Bilt name. In addition, Saucony markets athletic apparel under the Hind brand name. The company sells its athletic products in approximately 21 Saucony outlet stores in the United States and through sporting goods and shoe retailers in over 50 countries internationally. Saucony sold its Quintana Roo bicycle and wet suit division to a private investment firm in 2000. In September 2005, Saucony was purchased by Stride Rite Corporation for $170 million in cash and was subsequently folded into its retail operations.

ORIGINS

This history of Saucony is inextricably linked with that of Hyde Athletic Industries, which was founded by Russian immigrant Abraham Hyde, who came to the United States in 1890. At first Hyde, a cobbler, worked in a space he rented in a laundry making slippers from old carpet remnants. In 1910, Hyde was able to move his business to a house in Cambridge, Massachusetts, where he founded the company A. R. Hyde and Sons. Until 1932 he produced his carpet slippers and street shoes for women and children. He branched into athletic goods in 1932 with ice skates he called Pleasure Skates. By the end of the 1930s, he was producing a whole line of athletic footwear, including baseball shoes, roller boots, and bowling shoes.

With the outbreak of World War II, production was given over to boots for soldiers. As a result of this work, Hyde was awarded the Army/Navy E Award for Manufacturing Excellence, the only American shoe company so honored. After the war, the company resumed production of athletic shoes and, in 1952, purchased the Illinois Athletic Shoe Company, makers of Spot-Bilt athletic shoes. In 1960 NASA awarded Hyde a contract to produce footwear for Americas space program, and as a result, the boots worn by astronauts during the first space walk bore the Hyde label.

In 1968 Hyde purchased the Saucony Shoe Manufacturing Company, a maker of running shoes located in Kurztown, Pennsylvania. In the early 1970s Hyde transferred all development and production activities connected with running shoes to the new subsidiary. Until the late 1960s, Hyde and Sons was a family-owned business. In July 1969, however, the year after the Saucony acquisition, an initial public offering was announced. In October 1969, 350,000 shares were sold; the following year, the company changed its name to Hyde Athletic Industries, Inc.

SLOWLY GAINING MARKET SHARE

Hyde had annual sales of approximately $20 million in 1976, and Saucony running shoes remained a little-known niche brand. In 1977, however, a national American magazine gave the shoes an award for Best Quality. The article established the Saucony brand in the mind of runners throughout the country. It also established the company as a going prospect. In September 1977 Colgate-Palmolive offered to acquire the company for 312,690 shares of Colgate stock valued at about $7.7 million. In less than a month, however, the negotiations ended.

Saucony expanded its line of running shoes into the 1980s; as marathon runs, and later triathlons, became popular, Saucony won the loyalty of more and more long-distance runners. Still Hyde experienced slow growth during the 1980sa decade that otherwise saw an explosion in the sale of athletic shoes. Growth was hampered primarily by the companys size, which limited the amount it was able to spend on advertising. We didnt have the funds for promotion, Hydes vice-president John Fisher told the Christian Science Monitor in 1984, adding Nike was giving away more shoes than we used to sell. On the way up, it was just word of mouth. Nevertheless, some industry observers at the time felt that Hydes slow pace of expansion enabled it to maintain control of production quality that later contributed further to the companys reputation. In 1984 Hyde reported its sales had increased 22 percent over 1983, sales it attributed in large part to its line of Saucony running shoes. In early 1985, the company moved into a new headquarters building in Peabody, Massachusetts. The same year it purchased the Brook-field Athletic Shoe Company, a firm that manufactured roller skates, ice skates, and in-line skates.

Hyde announced in September 1988 plans to relaunch the PF Flyer line of canvas sneakers that had been so popular in the 1950s and 1960s but which had essentially disappeared from the market by the 1980s. The move was made in response to the sudden resurgence of popularity of another canvas shoe, Keds, which were expected to have sales three times higher than 1985 levels. The 1988 version of PF Flyers retailed for between $60 and $70, compared to less than $15 in the 1950s when Flyers were among the most popular gym shoes on the market. Hyde planned to market the shoes for 11-to-18-year-old males initially; it held off bringing out adult models for a year hoping they would catch on with younger buyers before their parents made nostalgia purchases.

In December 1988, Hyde announced that it had agreed to be acquired by an investment group called Silvershoe Partners for $8.50 a share, approximately $23.5 million in all. A week later, Blue Star Holding Inc. a mysterious Cambridge, Massachusetts, company owned, according to the Boston Globe, by publicity-shy Europeans, made a counteroffer of $9.50 a share. Blue Star would only say it had been watching Hyde for some time. Spokespersons for Hyde told the press it was banned by the terms of its agreement with Silvershoe from entering negotiations with any other buyer. In spring 1989, a Hyde shareholder asked a Superior Court judge to block the company from holding its June shareholders meeting at which the acquisition by Silver-shoe would be voted on. The shareholder, Roberta Klotz, maintained that the agreement, which gave Silvershoe control of two-thirds of Hyde stock, was against the interests of its stockholders. The Superior Court judge denied Klotzs request. By autumn, however, it looked as if a judges ruling would not be necessary to prevent the deal. Silvershoes bank refused to provide the levels of financing necessary to make the purchase. The deal did not close by the original July 31 deadline, and another in mid-August also passed. Finally, in late September, Hydes board of directors approved a request to terminate the merger agreement.

COMPANY PERSPECTIVES

Saucony is among the most respected names in running shoes. We offer a wide range of running and walking shoes, each with the Saucony trademark fit, feel and performance.

FINANCIAL AND LEGAL CHALLENGES

Hyde could not approach the sales levels of the big players in the field of athletic footwear, in particular Nike, which had the lucrative Michael Jordan basketball shoe franchise. By 1990, however, the company seemed to be in solid shape with annual sales of more than $60 million and a workforce of about 250, up from 150 in 1988. The company also boasted a line of running shoes that were made in the United States, in its Bangor, Maine, factory. In June 1992, Hyde signed a distribution agreement with Tokai Sporting Goods Co, a Japanese company, that introduced Saucony running shoes to the Japanese market. The deal also gave Hyde a Saucony sales office in Tokyo.

In the early 1990s, Hydes Saucony division was responsible for nearly three-quarters of its total sales. Most of those products were still serving what was a niche marketrunners, in particular long-distance runners, including professionals. However, the line had experienced a five-year sales plunge; between 1987 and 1991 sales fell from $55 million to $36 million.

In May 1992, the companys fortunes changed. An article in the magazine Consumer Reports gave Sauconys Jazz 3000 shoe its best buy rating. As a result of the unexpected publicity, Saucony sales doubled over the next couple months. Industry analysts wondered whether Hyde had the wherewithal or the savvy to capitalize on its new momentum. The company planned to more than double its advertising budget, to place ads in such nonrunning periodicals as USA Today, and to initiate a Made in the USA campaign. Hyde also estimated it would soon have to boost the output of its Bangor factory, by introducing new equipment and nearly tripling its workforce there. The following year, the company reported that sales of its Saucony line had risen by $11 million to $47 million. The number of stores that carried Saucony shoes had jumped 25 percent, and Hydes share of the American athletic shoe market had doubled to 6.6 percent.

Consumer Reports helped bring Hyde into the news again in mid-1993, but in a very different light. In July, Reebok International Ltd. sued its rival for falsely implying in its advertising and public relations materials that the Saucony Instep was the magazines top-rated womens walking shoe. In fact Consumer Reports had named Reeboks Avia 382 the top shoe. Hyde told the press it intended to contest the Reebok suit, and ten days later the two companies reached an out-of-court settlement. Hyde agreed to discontinue claims that it produced the top walking shoe.

Hyde Athletic Industries was producing outdoor recreational products for children, its PF Flyer line, Brookfield roller skates, and ice skates for children. However, its line of Saucony athletic footwear, including running, walking, hiking, fitness, and tennis shoes accounted for the lions share of the companys annual sales, nearly 75 percent. In 1993, noting that the fitness boom of the 1980s was winding down, Hyde expanded the line of walking and hiking shoes it had inaugurated in 1985, adding five new models. At the same time the company offered purchasers of its walking shoes a free membership in the Saucony Walking Club, which included a logbook, training information, and a regular newsletter.

During this time, Hyde expanded its international presence. In September 1993, it opened a sales and marketing office in Heidelberg, Germany, to service Europe, Great Britain, and Ireland. In November it acquired its Australian distributor, S.P. Agencies, for an undisclosed price, renaming it Saucony S.P. That deal gave Hyde an interest in four of its foreign distributors, including Saucony B.V. of the Benelux, Saucony Canada, the companys branch office, and Saucony U.K. in England. Otherwise, Hyde was represented by 15 independent distributors throughout the world.

KEY DATES

1910:
Abraham Hyde founds A. R. Hyde and Sons in Cambridge, Massachusetts.
1932:
Hyde and Sons introduces its first line of athletic footwear, known as Pleasure Skates.
1968:
Hyde acquires the Saucony Shoe Manufacturing Company, a running shoe manufacturer.
1969:
Hyde goes public.
1985:
Hyde moves its corporate headquarters to Peabody, Massachusetts.
1992:
Consumer Reports names Saucony Jazz 3000 running shoe best buy.
1994:
Federal Trade Commission charges that, contrary to its advertising, Hydes Saucony line is not made in the United States.
1998:
Hyde Athletic Industries is renamed Saucony Inc.
2000:
Saucony sells its bicycle and wet suit division to private investment firm.
2005:
Saucony is acquired by the Stride Rite Corporation for $170 million.

More unwelcome publicity emerged in the mid-1990s, when the Federal Trade Commission (FTC) charged that Hyde and New Balance Athletic Shoes, another New England manufacturer, had falsely claimed in their advertising that their products were made in the United States. The FTC maintained that although the shoes were assembled domestically, most of their parts were produced overseas. New Balance fought the ruling, claiming the FTCs guidelines were hopelessly outdated. Hyde, on the other hand, to avoid the costs of fighting a court battle, entered into a settlement with the agency. Under its terms, the company would be allowed to sell what stock it had that bore Made in U.S.A. labels. It also agreed to affix the label only to products made entirely or virtually entirely in the United States. Hyde and New Balance were the first high-profile cases brought against companies for violation of the FTCs Made in the U.S.A. standards. Some observers noted that the agency seemed to be going after small fish and ignoring much larger, more egregious offenders. Others believed it was looking to set precedents that would give it ammunition in larger cases. In the end, after an administrative review of its guidelines that lasted more than three years, the FTC decided to retain the strict standards it had enforced for nearly 50 years.

Hyde found itself at odds with its competitor Reebok again in 1996. Reebok had signed triathlete Michelle Jones to an endorsement contract early in the year. Hyde sued, claiming that under the terms of its own contract with Jones, they were entitled for a year after the deals expiration to an opportunity to match any competing offer. Hyde was the first company to go after endorsements in the triathlon, and maintaining its profile in the sportparticularly in the womens eventwas seen as important to the company. In March it won an injunction from a Massachusetts Superior Court judge barring Jones from representing Reebok in its advertising and from wearing Reebok products in appearances or competition. The two companies settled out-of-court the following summer. Reebok paid Hyde an undisclosed amount of money in exchange for its immediate release of Jones from all contractual obligations.

HYDE BECOMES SAUCONY

In late 1997, Hyde began undergoing a major transformation. In August it spun off Brookfield International Inc., the subsidiary that produced in-line skates, roller skates, skateboards, and protective gear, often under license from companies such as Walt Disney Company, Hasbro Inc., and Mattel Inc. Brookfields CEO James Buchanan and investment firm Brynwood III bought the company for an undisclosed sum. In January 1998, Hyde completely reorganized the Saucony Footwear division, which, with the sale of Brookfield, accounted for 85 percent of Hydes total annual sales. The division was split into Saucony International and Saucony North America, with administrative headquarters remaining in Peabody, Massachusetts.

The reorganization was undertaken to help turn Saucony around, as it had reported losses of $4.7 million for 1997. About half of Sauconys employees in Peabody were expected to be relocated or reassigned to make the divisions operations more efficient. In spring 1998 Hyde formally changed its name to Saucony Inc.

In a little more than a year, Saucony turned its performance around completely. After hovering around the same price for five years, its stock prices more than tripled. Cause for the turnaround was the Saucony Originals line. Originals were built around the Jazz running shoe, one of the companys popular, long-discontinued, high-performance models of the early 1980s. The Jazz shoe was unable to match the technology of the late 1990s, but they were comfortable and attractive, and, with a price tag between $40 and $60, they were very affordable. When it introduced the new line, Saucony also extended its advertising well beyond the running magazine forum, into youth-oriented periodicals such as Spin and Vibe. When Saucony Originals were featured in a fashion forecast in Teen People, the line took off. The fact that the shoes were frequently worn by rock stars only increased their popularity more. With the Originals line accounting for 37 percent of the companys 1999 net sales Saucony planned to introduce other Originals models in 2000.

Despite lackluster performance for the athletic shoe industry as a whole, Sauconys 1999 sales increased 47 percent over 1998. As the millennium turned, Saucony increased its public profile by sponsoring events such as Super Bowl XXXIV and the Los Angeles Marathon, where the company donated 1,900 pairs of its shoes to local students.

REFOCUSING ON CORE BUSINESS

In June 2000, Saucony sold its cycling and wetsuit division to QR Merlin Acquisition LLC, which operated under JHK Investments, LLC, a private investment fund. The company sold the uneven performing division in order to focus on its more profitable footwear and apparel business. Prior to selling the division, Saucony sought to improve its performance by making substantial management changes, consolidating operations, outsourcing production, and reducing its operating cost structure. These changes, however, failed to stem eroding profit margins in the already competitive hard-goods cycling market.

In September 2000, Saucony unveiled its first full Hyde Authentics line to break into the causal and dress-footwear market. The company hoped the new line would earn between $5 million and $10 million in sales in the first year. The new collection included 14 oxford and boot styles based on vintage Saucony baseball, football, and coaching shoes, resembling its athletic designs of the 1940s and 1950s. The company marketed the brand to consumers who were seeking style rather than strictly a performance shoe.

Nonetheless, Saucony began battling with a slew of shipment cancellations, a soft 2000 holiday season, and low performance of its Originals line. These problems resulted in disappointing fourth-quarter results that continued into the first quarter of 2001 with net sales falling 7 percent to $43.7 million. With the aim of returning to its historic levels of growth, the company began several initiatives, involving overhauling its product-development division to make products with a broader consumer appeal and refocusing attention on marketing its brands to urban retailers. Other strategic initiatives included resizing its domestic footwear business expense levels, which resulted in a more efficient cost structure, and closing its footwear manufacturing plant in Maine, which enabled it to exit the manufacturing business. Saucony also closed its Taiwan office and opened a new sourcing and development facility near its key footwear suppliers in China. Additionally, the company decided to phase out its Hyde Authentics lifestyle footwear business, and introduced a new proprietary footwear technology, Custom Ride Management. Moreover, the company moved to develop a niche market in Malaysia by aggressively marketing its state-of-the-art running shoes to professional runners.

Despite its efforts to regain sales momentum, Sauconys 2001 third-quarter results plunged with earnings falling more than 90 percent to $362,000 compared with $3.8 million in 2000. The companys core business slipped 37 percent. Saucony attributed the sales decline to both the overall economic slowdown after the September 11, 2001, terrorist attacks and a higher sales level of close-out products and discounted footwear sales. For fiscal year 2001, sales fell 21 percent to $132.3 million from $167.8 million in the previous year. Despite the sobering results, the company pointed to its strategic initiatives that would improve its business going forward. By the end of fiscal 2003, Saucony had regained its footing with net income up 62 percent to $8.5 million from $5.2 million in fiscal 2002. John Fisher, president and chief operating officer, attributed the strong showing to ongoing strength in the companys domestic technical business as well as its Hind apparel and international operations.

STRIDE RITE ACQUIRES SAUCONY

In June 2005, the Stride Rite Corporation, known for its childrens shoes, announced that it was acquiring Saucony for $170 million in cash or $23 per share. The purchase price was actually $140 million since Saucony had $30 million in cash on its balance sheet. The buy-out, which marked the culmination of a strategic alternative review process initiated by Saucony in August 2004, received the unanimous approval of both companies executive boards. For Stride Rite, which had 2004 sales of $558 million, the acquisition promised an immediate entrance into international markets and a boost to its share of the childrens athletic shoe market. With sales of $167 million, Saucony stood to receive an infusion of capital to compete against bigger sellers such as Nike and Reebok as well as get a larger share of the childrens footwear segment.

After completing the acquisition in September 2005, Stride Rite began integrating Saucony into its corporate fold, shutting down Sauconys headquarters and consolidating operations at its own headquarters in Lexington, Massachusetts. In 2006, Stride Rite also planned on expanding the capacity of several of its Chinese factories to handle Sauconys production requirements, and aimed to increase Sauconys offerings in the childrens footwear market. With the integration of the two companies, it appeared that Saucony was well placed to better innovate and promote its brand to consumers.

Gerald E. Brennan
Updated, Bruce P. Montgomery

PRINCIPAL SUBSIDIARIES

Saucony Canada, Inc. (85%); Saucony UK, Inc.; Saucony Sports, B.V. (Netherlands); Saucony Germany.

PRINCIPAL COMPETITORS

Nike, Inc.; ASICS; Brooks Sports, Inc.

FURTHER READING

Abel, Katie, Slipping Sales Prompt Saucony to Get Back on Track, Footwear News, May 28, 2001, p. 4.

, Struggling Saucony Banking on Revamp to Revive Growth, Footwear News, August 20, 2001, p. 2.

Avia Unit Sues Rival Hyde over No. 1 Footwear Title, Wall Street Journal, July 16, 1993, p. 6B.

Bernard, Sharyn, and Claude Solnik, Retail Closings Dampen Athletic Sales as Nike Falls Below Street Estimates, Footwear News, February 14, 2000, p.4.

Carofano, Jennifer, Up and Running: A New Distribution Focus Has Saucony Gaining Ground in the Competitive Athletic Marketplace, Footwear News, July 26, 2004, p. 148.

Europeans Make Hyde Bid, Boston Globe, December 29, 1988, p. 26.

Gatlin, Greg, Saucony Steps Toward Possible Sale, Boston Herald, August 3, 2004, p. 37.

Gibbs, Alison, Hyde Reorganizes Saucony Unit, Boston Herald, January 22, 1998, p. 32.

Goodison, Donna, Saucony HQ Closing Down, Boston Herald, January 20, 2006, p. 27.

Hyde Athletic Buys Cambridge Bike Maker, Boston Globe, February 20, 1998, p. E5.

Hyde Athletic Makes Strides in Footwear, Boston Herald, December 19, 1994, p. 39.

Hyde Athletic Runs into the Red, Boston Herald, April 4, 1998, p. 16.

Lenetz, Dana, Saucony Lowers Projections as Orders Fall, Footwear News, February 5, 2001, p. 46.

Merl, Jean, Helping Youths in the Long Run, Los Angeles Times, February 9, 2000, p. B1.

Pereira, Joseph, Hyde Beats Reebok in Endorsement Race, Wall Street Journal, March 26, 1996, p. B14.

Powell, Jennifer Heldt, Shoe Cos. Put Best Feet Forward, Boston Herald, June 3, 2005, p. 31.

Reidy, Chris, Made in the USA; Or Is It? Boston Globe, April 4, 1995, p. 43.

, Picking Up the Pace: Fashions, Broader Base Let New Balance Set a Record, Boston Globe, April 12, 2000, p. E1.

Sauconys Profits Plunge, Boston Business Journal, November 9, 2001, p. 3.

Scott, David Clark, Best Feet Forward: Athletic-Shoe Industry, Stumbling over Imports, Is Still in the Race, Christian Science Monitor, April 12, 1984, p. B1.

Shapiro, Eban, Getting a Running Shoe in the Door, New York Times, August 13, 1992, p. D1.

Solnik, Claude, Hyde Authentics Will Go Where Athletics Have Hardly Ever Gone Before: Into Casual Dress, Footwear News, September 4, 2000, p.5.

, Saucony Slimming Down: Sheds Cycling, Wetsuit Biz, Footwear News, July 17, 2000, p. 2.

, Street Warms Up to Athletic Footwear as Key Players Grow, Footwear News, April 17, 2000.

Strauss, Gary, Hyde Athletic Is Making Strides, USA Today, July 28, 1993, p. 3B.

Syre, Steven, and Charles Stein, Saucony Finds Shoe that Fits, Boston Globe, June 3, 1999, p. D1.

Vartran, Vartanig G., A Brisk Pace Is Set by Nike, New York Times, January 21, 1986, p. D12.

Walsh, Sharon, FTC Cites 2 Athletic Shoe Makers; Agency Alleges Made in the U.S.A. Labels on Sneakers Are False, Washington Post, September 21, 1994, p. F2.

White, George, Sneaking Back: P.F. Flyers LiveThis Time from Head to Toe, Los Angeles Times, September 15, 1988, p. 1.

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Saucony Inc.

Saucony Inc.

13 Centennial Drive
Peabody, Massachusetts 01961
U.S.A.
Telephone: (978) 532-9000
Fax: (978) 532-6105
Web site: http://www.saucony.com

Public Company
Incorporated:
1910 as A.R. Hyde And Sons
Employees: 494
Sales: $154.1 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbols: SCNYA SCNYB
NAIC: 316211 Rubber and Plastics Footwear Manufacturing; 316219 Other Footwear Manufacturing; 315228 Mens and Boys Cut and Sew Other Outerwear Manufacturing; 315239 Womens and Girls Cut and Sew Other Outerwear Manufacturing; 336991 Motorcycles, Bicycles, and Parts

Saucony Inc. (under the corporate umbrella of Hyde Athletic Industries, Inc. until 1998 when Hyde reorganized and took the Saucony name), is known primarily as a designer, manufacturer, and marketer of high performance running shoes, in particular for marathon runners and triathletes. During the 1990s, the company expanded its market presence with its walking and hiking shoes, and the reintroduction of classic models from the 1980s. Saucony also manufactures Hind brand athletic apparel, high performance bicycles through its Merlin subsidiary, and Spot-Bilt shoes for coaches and officials. In 2000, its products were available in 23 foreign countries and in over 5,500 retail outlets in the United States.

Origins

This history of Saucony is inextricably linked with that of Hyde Athletic Industries, which was founded by Russian immigrant Abraham Hyde, who came to the United States in 1890. At first Hyde, a cobbler, worked in a space he rented in a laundry making slippers from old carpet remnants. In 1910, Hyde was able to move his business to a house in Cambridge, Massachusetts, where he founded the company A.R. Hyde and Sons. Until 1932 he produced his carpet slippers and street shoes for women and children. He branched into athletic goods in 1932 with ice skates he called Pleasure Skates. By the end of the 1930s, he was producing a whole line of athletic footwear, including baseball shoes, roller boots, and bowling shoes.

With the outbreak of World War II, production was given over to boots for soldiers. As a result of this work, Hyde was awarded the Army/Navy E Award for Manufacturing Excellencethe only American shoe company so honored. After the war, the company resumed production of athletic shoes and, in 1952, purchased the Illinois Athletic Shoe Company, makers of Spot-Bilt athletic shoes. In 1960 NASA awarded Hyde a contract to produce footwear for Americas space program, and as a result, the boots worn by astronauts during the first space walk bore the Hyde label.

In 1968 Hyde purchased the Saucony Shoe Manufacturing Company, a maker of running shoes located in Kurztown, Pennsylvania. In the early 1970s Hyde transferred all development and production activities connected with running shoes to the new subsidiary. Until the late 1960s, Hyde and Sons was a family-owned business. However, in July 1969, the year after the Saucony acquisition, an initial public offering was announced. In October 1969, 350,000 shares were sold; the following year, the company changed its name to Hyde Athletic Industries, Inc.

Slowly Gaining Market Share in the 1970s and 1980s

Hyde had annual sales of approximately $20 million in 1976, and Saucony running shoes remained a little-known niche brand. In 1977, however, a national American magazine gave the shoes an award for Best Quality. The article established the Saucony brand in the mind of runners throughout the country. It also established the company as a going prospect. In September 1977 Colgate Palmolive offered to acquire the company for 312,690 shares of Colgate stock valued at about $7.7 million. In less than a month, however, the negotiations ended. Saucony expanded its line of running shoes into the 1980s; as marathon runs, and later triathlons, became popular, Saucony won the loyalty of more and more long-distance runners. Still Hyde experienced slow growth during the 1980sa decade that otherwise saw an explosion in the sale of athletic shoes. Growth was hampered primarily by the companys size, which limited the amount it was able to spend on advertising. We didnt have the funds for promotion, Hydes vice-president John Fisher told the Christian Science Monitor in 1984, adding Nike was giving away more shoes than we used to sell. On the way up, it was just word of mouth. However, some industry observers at the time felt that Hydes slow pace of expansion enabled it to maintain control of production quality that later contributed further to the companys reputation. In 1984 Hyde reported its sales had increased 22 percent over 1983, sales it attributed in large part to its line of Saucony running shoes. In early 1985, the company moved into a new headquarters building in Peabody, Massachusetts. The same year it purchased the Brookfield Athletic Shoe Company, a firm which manufactured roller skates, ice skates, and in-line skates.

Hyde announced in September 1988 plans to re-launch the PF Flyer line of canvas sneakers that had been so popular in the 1950s and 1960s but which had essentially disappeared from the market by the 1980s. The move was made in response to the sudden resurgence of popularity of another canvas shoe, Keds, which were expected to have sales three times higher than 1985 levels. The 1988 version of PF Flyers retailed for between $60 and $70, compared to less than $15 in the 1950s when Flyers were among the most popular gym shoes on the market. Hyde planned to market the shoes for 11 to 18 year old males initially; it held off bringing out adult models for a year hoping they would catch on with younger buyers before their parents made nostalgia purchases.

In December 1988, Hyde announced that it had agreed to be acquired by an investment group called Silvershoe Partners for $8.50 a share, approximately $23.5 million in all. A week later, Blue Star Holding Inc. a mysterious Cambridge, Massachusetts, company owned, according to the Boston Globe, by publicity-shy Europeans, made a counteroffer of $9.50 a share. Blue Star would only say it had been watching Hyde for some time. Spokespersons for Hyde told the press it was banned by the terms of its agreement with Silvershoe from entering negotiations with any other buyer. In spring 1989, a Hyde shareholder asked a Superior Court judge to block the company from holding its June shareholders meeting at which the acquisition by Silvershoe would be voted on. The shareholder, Roberta Klotz, maintained that the agreement, which gave Silvershoe control of two-thirds of Hyde stock, was against the interests of its stockholders. The Superior Court judge denied Klotzs request. By autumn, however, it looked like a judges ruling would not be necessary to prevent the deal. Silvershoes bank refused to provide the levels of financing necessary to make the purchase. The deal did not close by the original July 31 deadline, and another in mid-August also passed. Finally, in late September, Hydes board of directors approved a request to terminate the merger agreement.

Challenges in the Early 1990s

Hyde could not approach the sales levels of the big players in the field of athletic footwear, in particular Nike, which had the lucrative Michael Jordan basketball shoe franchise. By 1990, however, the company seemed to be in solid shape with annual sales of more than $60 million and a workforce of about 250, up from 150 in 1988. The company also boasted a line of running shoes that were made in the United States, in its Bangor, Maine, factory. In June 1992, Hyde signed a distribution agreement with Tokai Sporting Goods Co, a Japanese company, that introduced Saucony running shoes to the Japanese market. The deal also gave Hyde a Saucony sales office in Tokyo.

In the early 1990s, Hydes Saucony division was responsible for nearly three-quarters of its total sales. Most of those products were still serving what was a niche marketrunners, in particular long-distance runners, including professionals. However, the line had experienced a five-year sales plunge; between 1987 and 1991 sales fell from $55 million to $36 million.

In May 1992, the companys fortunes changed. An article in the magazine Consumer Reports gave Sauconys Jazz 3000 shoe its best buy rating. As a result of the unexpected publicity, Saucony sales doubled over the next couple months. Industry analysts wondered whether Hyde had the wherewithal or the savvy to capitalize on its new momentum. The company planned to more than double its advertising budget, to place ads in non-running periodicals like USA Today, and to initiate a Made in the USA campaign. Hyde also estimated it would soon have to boost the output of its Bangor factory, by introducing new equipment and nearly tripling its workforce there. The following year, the company reported that sales of its Saucony line had risen by $11 million to $47 million. The number of stores that carried Saucony shoes had jumped 25 percent, and Hydes share of the American athletic shoe market had doubled to 6.6 percent.

Company Perspectives:

Saucony Incorporateds family of companies offers a wide range of technical products for every workout need. We design and market separate lines for men and women within most technical footwear categories. In keeping with our emphasis on performance, we market and sell our technical footwear to athletes who have a high participation rate in their sport of choice. We address this market through our Loyal to the Sport advertising campaign. We believe that these consumers are more brand loyal than those who buy athletic footwear for casual use. The Saucony brand is recognized for its technical innovation and performance. As a result of our application of biomechanical technology in the design process, we believe that our Saucony footwear has a distinctive fit and feel that is attractive to athletic users. We design our Saucony technical cross training, womens walking and outdoor technical trail shoes with many of the same performance features and fit and feel characteristics as are found in Saucony technical running shoes.

Consumer Reports helped bring Hyde into the news again in mid-1993, but in a very different light. In July, Reebok International Ltd. sued its rival for falsely implying in its advertising and public relations materials that the Saucony Instep was the magazines top-rated womens walking shoe. In fact Consumer Reports had named Reeboks Avia 382 the top shoe. Hyde told the press it intended to contest the Reebok suit, and ten days later the two companies reached an out-of-court settlement. Hyde agreed to discontinue claims that it produced the top walking shoe.

Hyde Athletic Industries was producing outdoor recreational products for children, its PF Flyer line, Brookfield roller skates, and ice skates for children. However, its line of Saucony athletic footwear, including running, walking, hiking, fitness, and tennis shoes accounted for the lions share of the companys annual sales, nearly 75 percent. In 1993, noting that the fitness boom of the 1980s was winding down, Hyde expanded the line of walking and hiking shoes it had inaugurated in 1985, adding five new models. At the same time the company offered purchasers of its walking shoes a free membership in the Saucony Walking Club, which included a logbook, training information, and a regular newsletter.

During this time, Hyde expanded its international presence. In September 1993, it opened a sales and marketing office in Heidelberg, Germany, to service Europe, Great Britain, and Ireland. In November it acquired its Australian distributor, S.P. Agencies, for an undisclosed price, renaming it Saucony S.P. That deal gave Hyde an interest in four of its foreign distributors, including Saucony B.V. of the Benelux, Saucony Canada, the companys branch office, and Saucony U.K. in England. Otherwise, Hyde was represented by 15 independent distributors throughout the world.

More unwelcome publicity emerged in the mid-1990s, when the Federal Trade Commission (FTC) charged that Hyde and New Balance Athletic Shoes, another New England manufacturer, had falsely claimed in their advertising that their products were made in the United States. The FTC maintained that although the shoes were assembled domestically, most of their parts were produced overseas. New Balance fought the ruling, claiming the FTCs guidelines were hopelessly outdated. Hyde, on the other hand, to avoid the costs of fighting a court battle, entered into a settlement with the agency. Under its terms, the company would be allowed to sell what stock it had that bore Made in U.S.A. labels. It also agreed to affix the label only to products made entirely or virtually entirely in the United States. Hyde and New Balance were the first high-profile cases brought against companies for violation of the FTCs Made in the U.S.A. standards. Some observers noted that the agency seemed to be going after small fish and ignoring much larger, more egregious offenders. Others believed it was looking to set precedents that would give it ammunition in larger cases. In the end, after an administrative review of its guidelines that lasted more than three years, the FTC decided to retain the strict standards it had enforced for nearly 50 years.

Hyde found itself at odds with its competitor Reebok again in 1996. Reebok had signed triathlete Michelle Jones to an endorsement contract early in the year. Hyde sued, claiming that under the terms of its own contract with Jones, they were entitled for a year after the deals expiration to an opportunity to match any competing offer. Hyde was the first company to go after endorsements in the triathlon, and maintaining its profile in the sportparticularly in the womens eventwas seen as important to the company. In March it won an injunction from a Massachusetts Superior Court judge barring Jones from representing Reebok in its advertising and from wearing Reebok products in appearances or competition. The two companies settled out-of-court the following summer. Reebok paid Hyde an undisclosed amount of money in exchange for its immediate release of Jones from all contractual obligations.

Hyde Becomes Saucony in the Late 1990s

In late 1997, Hyde began undergoing a major transformation. In August it spun off Brookfield International Inc., the subsidiary that produced in-line skates, roller skates, skate-boards, and protective gear, often under license from companies such as Walt Disney Co., Hasbro Inc., and Mattel Inc. Brookfields CEO James Buchanan and investment firm Brynwood III bought the company for an undisclosed sum. In January 1998, Hyde completely reorganized the Saucony Footwear division, which, with the sale of Brookfield, accounted for 85 percent of Hydes total annual sales. The division was split into Saucony International and Saucony North America, with administrative headquarters remaining in Peabody, Massachusetts.

The reorganization was undertaken to help turn Saucony around, as it had reported losses of $4.7 million for 1997. About half of Sauconys employees in Peabody were expected to be relocated or reassigned to make the divisions operations more efficient. In spring 1998 Hyde formally changed its name to Saucony Inc.

Key Dates:

1910:
Abraham Hyde founds A.R. Hyde and Sons in Cambridge, Massachusetts.
1932:
Hyde and Sons introduces its first line of athletic footwear, Pleasure Skates.
1968:
Hyde acquires the Saucony Shoe Manufacturing Company, a running shoe manufacturer.
1969:
Hyde goes public.
1985:
Hyde moves its corporate headquarters to Peabody, Massachusetts.
1992:
Consumer Reports names Saucony Jazz 3000 running shoe best buy.
1994:
Federal Trade Commission charges that, contrary to its advertising, Hydes Saucony line is not made in the United States.
1998:
Hyde Athletic Industries renamed Saucony Inc.

In a little more than a year, Saucony turned its performance around completely. After hovering around the same price for five years, its stock prices more than tripled. Cause for the turnaround was the Saucony Originals line. Originals were built around the Jazz running shoe, one of the companys popular, long-discontinued, high-performance models of the early 1980s. Jazz were unable to match the technology of the late 1990s, but they were comfortable and attractive, and, with a price tag between $40 and $60, they were very affordable. When it introduced the new line, Saucony also extended its advertising well beyond the running magazine forum, into youth-oriented periodicals such as Spin and Vibe. When Saucony Originals were featured in a fashion forecast in Teen People, the line took off. The fact that the shoes were frequently worn by rock stars only increased their popularity more. With the Originals line accounting for 37 percent of the companys 1999 net sales Saucony planned to introduce other Originals models in 2000.

Despite lackluster performance for the athletic shoe industry as a whole, Sauconys 1999 sales increased 47 percent over 1998. As the millennium turned, Saucony increased its public profile by sponsoring events such as Super Bowl XXXIV and the Los Angeles Marathon, where the company donated 1,900 pairs of its shoes to local students.

Principal Subsidiaries

Hyde International Services, Ltd. (Hong Kong); Hyde Transition Corp.; Hyde, Inc.; Saucony Canada, Inc. (85%); Saucony UK, Inc.; Saucony Sports, B.V. (Netherlands); Saucony SP Pty. Ltd. (Australia); Saucony Deutschland Vertriebs GmbH (Germany); Quintana Roo, Inc.

Principal Competitors

Nike, Inc.; New Balance Athletic Shoe, Inc.; Reebok International Ltd.; Avia Group International, Inc.

Further Reading

Avia Unit Sues Rival Hyde Over No. 1 Footwear Title, Wall Street Journal, July 16, 1993, p. 6B.

Europeans Make Hyde Bid, Boston Globe, December 29, 1988, p. 26.

Gibbs, Alison, Hyde Reorganizes Saucony Unit, Boston Herald, January 22, 1998, p. 32.

Hyde Athletic Buys Cambridge Bike Maker, Boston Globe, February 20, 1998, p. E5.

Hyde Athletic Makes Strides in Footwear, Boston Herald, December 19, 1994, p. 39.

Hyde Athletic Runs into the Red, Boston Herald April 4, 1998, p. 16.

Merl, Jean, Helping Youths in the Long Run, Los Angeles Times, February 9, 2000, p. B1.

Pereira, Joseph, Hyde Beats Reebok in Endorsement Race, Wall Street Journal, March 26, 1996, p. B14.

Reidy, Chris, Made in the USA; Or is it?, Boston Globe, April 4, 1995, p. 43.

, Picking Up the Pace: Fashions, Broader Base Let New Balance Set a Record, Boston Globe, April 12, 2000, p. E1.

Scott, David Clark, Best Feet Forward: Athletic-Shoe Industry, Stumbling Over Imports, Is Still in the Race, Christian Science Monitor, April 12, 1984, p. B1.

Shapiro, Eban, Getting a Running Shoe in the Door, New York Times, August 13, 1992, p. D1.

Strauss, Gary, Hyde Athletic Is Making Strides, USA Today, July 28, 1993, p. 3B.

Syre, Steven, and Charles Stein, Saucony Finds Shoe that Fits, Boston Globe, June 3, 1999, p. D1.

Vartran, Vartanig G., A Brisk Pace Is Set by Nike, New York Times, January 21, 1986, p. D12.

Walsh, Sharon, FTC Cites 2 Athletic Shoe Makers; Agency Alleges Made in the U.S.A. Labels on Sneakers Are False, Washington Post, September 21, 1994, p. F2.

White, George, Sneaking Back: P.F. Flyers LiveThis Time from Head to Toe, Los Angeles Times, September 15, 1988, Sec. 4, p. 1.

Gerald E. Brennan

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