New Heelys CEO in Rebuild Mode

NEW YORK — After several punishing quarters, Heelys Inc. is trying to reverse course with the help of its new leader, Tom Hansen.

The former advertising executive — and footwear-industry outsider — is just weeks into his reign at the Dallas-based company and has already identified a new direction for Heelys that will require cost cutting and rebranding.

“Heelys is an icon brand, which I define as a brand that either re-creates, or totally creates, its own category,” he told Footwear News during his first interview last week. “It was probably one of the most disruptive forces in the [footwear] category when it came out. But Heelys, as a brand, never developed. It’s still a product. That represents a giant opportunity.”

Hansen has his work cut out for him. Heelys’ CEO slot has been a revolving door since longtime chief Michael Staffaroni departed in February 2008. “Heelys enjoyed such tremendous growth right out of the shoot. It’s hard to be the guy riding it on the way down,” Hansen said of the former CEOs.

The newest chief executive believes that he is in a different position, though, one in which the “turnaround has already begun.” And with a vastly different background from most of his predecessors, he plans to tap into unconventional problem-solving skills. (Hansen formerly served as the president of TM Advertising, where he created campaigns including American Airlines’ “We Know Why You Fly.”) “Guys who have worked in one category seek the same solutions that have worked previously. I have the benefit of having seen a lot of innovative solutions across different categories,” Hansen explained.

His strategy for rebuilding Heelys is twofold: improve the look and feel of Heelys’ identifiable wheeled shoe and then grow beyond its niche business. “In the short term, our focus needs to be on solidifying the core business and getting it as focused as possible,” Hansen said. “In the long term, we need to take the brand and expand.”

The CEO attests to positive feedback on Heelys’ fall styles, which feature a sleeker and more athletic look. “The traditional Heelys has been a thick-soled skate shoe, but now we’re focused on being more stylish and contemporary,” Hansen said.

Gerald Bendheim, owner of the Fritz’s Skate, Bike & Surf in Miami Beach, Fla., said the difference between Heelys’ current and former styling is “night and day.” He explained, “Before, people wanted the shoes because of what they were — it didn’t matter what they looked like. Now people are not just buying them because they have a wheel in the heel. When you put [a Heelys shoe] on the wall next to any in-demand shoe, it holds its own. The style is on the mark.”

Beyond getting the core product right, Hansen knows he must expand the brand to create longevity for the company. He said dance competitions could provide one opportunity. And consumers could see new products come to market under the Heelys brand as early as spring ’10. “We are going to aggressively launch new products,” he said.

Acquisitions, too, could be a way to add to Heelys’ product portfolio. “We have a lot of cash and no debt,” Hansen said, noting that the company ended the second quarter with $67.1 million in cash and cash equivalents. “It would make sense to seek acquisitions in complementary categories.”

As for becoming someone else’s acquisition, which was last explored when Skechers USA Inc. made an unsuccessful bid for Heelys last summer, Hansen said a buyout would be unlikely. “Until we’ve realized the potential of the company, I don’t think we’d look at a sale for the kind of price that would be offered.”

Certainly the value of Heelys has dropped since it exploded onto the footwear scene in 2000. The company raised $135 million for an IPO in December 2006, but since then has seen its business falter. In 2008, the firm reported a loss of $5.9 million, compared with a net income of $21.9 million in 2007, while revenues dropped more than 61 percent to just $70.7 million. Heelys’ loss totaled $1.6 million in the most recent quarter, ended June 30, while sales dipped 32 percent to $12.4 million.

Hansen said he believes the company will achieve profitability in the future, although he declined to put a timeframe on such a turnaround. “You’ve got to have sales to have profit,” he said. “We’re a discretionary spend in an economic downturn. But once we see consumer spending sentiments change, with our new product line out there, we’ll benefit from that.”

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