The First Skate Retailer to Topple

Last week the Active Wallace Group became the latest retailer to file for Ch. 11. What is interesting to note is that it’s the first specifically in the skate category this year. As an online skate retailer with 21 retail locations in CA, this reflects slowing sales in what has been one of the hottest categories over the last 5 years (as well as the sad state of the California economy).

The list of unsecured creditors includes several notables in the top 20; however, the impact on a per share basis is minimal.

Nike at #1 with $1.5mm at risk, less than $0.01 per share.

Quicksilver at #6 with $515 at risk, less than $0.01 per share.

Vans at #11 with $348k at risk, less than $0.01 per share.

In 2007, skate approached 5% share of the broader footwear market outperforming other categories, but sales growth has slowed dramatically and now accounts for less than 3% thus far in 2009 (see chart). While Heelys admittedly drove part of the 2007 results, the decline we’re seeing today more than offsets that. Nike is now one of the top brands in this space (Nike 6.0 and Hurley) and the company recently noted on its call that it is a standout in its US business. Not good news for Vans (VF Corp) which is disproportionately exposed to the coast. Another nugget to lead to our bearishness on VFC.

The First Skate Retailer to Topple - FootwrMSChg Cat 3 09