K-Swiss has absolutely owned the sports marketing world's attention over the past couple days, as its viral video featuring Danny McBride of "Eastbound & Down" as Kenny Powers has been watched over and over again.
The video, full of profanity that no major brand has ever dared to use, has made K-Swiss top of mind. There are now two questions to consider: Does "Kenny Powers" move the needle when consumers get to the shoe store? Is K-Swiss spending too much on marketing?
"What attracted me to this company was the fact that we can take risks to get noticed that the other bigger brands wouldn't take," said Chris Kyle, the company's vice president of marketing, who joined K-Swiss from Adidas a year ago. "Adidas can outspend us by massive amounts, so our job as a little company is to do our best to make some noise."
That noise has come at a significant cost. The company is expected to pull in $281 million in sales this year. That means that they do 1/100th the sales that Nike does.
Marketing costs, which include endorsing the likes of "Kenny Powers" and Jillian Michaels, have been high enough to impact the company's profitability. In May, the company's chairman and CEO Steven Nichols told analysts that the company reduced the percentage they spent on marketing and planned to reach a more normal percentage in 2012 but still couldn't guarantee profitability.
The marketing has worked as its new Tubes (246,000 pairs) surpassed sales of its classic shoes (184,000 pairs) for the first quarter in company history, but for those inside K-Swiss as well as K-Swiss investors, "working" is relative.
Shares of K-Swiss are down 13.1 percent year-to-date compared to the greater NASDAQ, which is up 4.8 percent.
Kyle isn't immediately concerned about the money the company is spending to make the brand top of mind.
"We're in pure investment mode," Kyle said. "We don't want our overall dollar spend to come down, but we'd like our revenue to go up obviously."
Kyle said the latest campaign, which hits TV on Wednesday during the ESPY's, accomplishes his goal as a marketer.
"We want people to thinking about our brand in a different way," Kyle said. "Some people see us as that company that makes conservative, white tennis shoes and some of the kids today don't even know that much. Here's their wake-up call. This is who we are now. This is the new product we're making. And here's a story to tell you about it."
Some analysts, whose job it is to obviously look at K-Swiss as an investment, are skeptical about the dollars being spent.
"They have something going for them in that they have credible product technology in Tubes," said Matt Powell, analyst for SportsOneSource, a market retail tracking firm. "But I don't think sales have anything to do with Kenny Powers. So I think they're wasting a lot of money on marketing."
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