A shoe company that was once widely scorned has executed an incredible turnaround
The shoe brand was forced to pay a $40 million settlement after the FTC ruled it exaggerated the health benefits of its Kim Kardashian-endorsed Shape up shoes. The brand was known for making cheap knockoffs of designer shoes.
But Skechers redesigned its shoes, and sales soared 36% in the most recent quarter. Shares have almost tripled in the past year.
The brand has now surpassed Adidas to become the second-largest athletic footwear company in America.
Skechers has 5% of US market share, compared with 4.6% for Adidas, The Wall Street Journal reports, citing NPD group.
Nike still has the largest share, with 62% of the market.
Skechers is "is the latest beneficiary of the so-called athleisure trend in retail, with shoppers snapping up sport-styled clothes and shoes regardless of whether they plan to work out in them," according to WSJ.
It's also one of the most underrated companies, according to a recent report by Morgan Stanley.
"Skechers is a much better company than the Street appreciates," analysts wrote in a recent note to clients.
"The Skechers brand has evolved from a knock-off brand, to more one with its own looks and styles," Morgan Stanley's analysts write.
Skechers also invested in upgrading its factories and distribution centers.
Finally, Skechers also improved its marketing strategy.
The brand hired singer Demi Lovato to promote a line for teens. It also started selling a shoe designed specifically for golf, endorsed by professional player Matt Kuchar.
The number of people participating in running events has grown an average of 9% every year since 2005, according to Morgan Stanley. Data also shows that millennials believe exercise is essential for health, while their parents only focused on diet.
"Increased activity leads to increased athletic apparel and footwear spending," the analysts write. "We see athletic footwear and apparel as more than a fashion trend."
While the popularity of yoga pants and sneakers is often cited as a fashion trend, Morgan Stanley analysts believe that shoppers are hooked on casual comfort.
The analysts believe that shoppers will continue to choose this kind of apparel.