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Does the world really need another sneakermaker? Nautica and Genesco aim to find out. So do Ralph Lauren and Tommy Hilfiger. Jostling Nike By Kelly Barron Nautica Enterprises, Inc., the $387 million (sales) clothing company, licenses its name for fragrances, watches and luggage. Sneakers? Why not? Nautica is selling a line of athletic shoes retailing from $60 to $95. The market is tempting because sneakers are a low-tech product made in low-wage Far East factories and carry high margins. But it's a business where marketing is all, or nearly all, and Nike, Reebok, L.A. Gear, Fila, Converse and Adidas are master marketers. Nevertheless, David Chu, Nautica's founder and chief designer, thinks he has a shot. "When you have a large market," he says, "there's always room for a new idea." To cut through the sneaker clutter, Nautica has signed Glen Rice, forward for the Charlotte Hornets, to a three-year endorsement deal estimated at $2 million. Rice won't turn Nautica, which sells khakis and primary-colored polos, into an athletic powerhouse like Nike, but it buys the company some credibility. Nautica's footwear line is selling through 600 Foot Locker stores and in department stores that carry the company's clothes. Nautica is joining the sneaker scrum through a fairly straightforward licensing deal. The new shoes will bear the Nautica name but will have very little of Nautica's money behind it. Genesco Inc., the 73-year-old Nashville footwear manufacturer and retailer (sales: $461 million) that makes Johnston & Murphy shoes, will bear all the manufacturing and distribution costs.
Flat feet
Flat feet Fashion companies are flooding the footwear market, but sales growth has stalled. 
*Excludes hiking noots and sports sandals. Source: Footwear Market Guide. For every pair of Nautica shoes that retails at $95, Nautica pockets about $2.85, based on the wholesale cost of the shoes. Say this for David Chu, 42: He knows the value of the Nautica name. He started Nautica in 1983 after deciding not to follow his father into the Chinese restaurant business. Chu took some courses at New York City's Fashion Institute of Technology, then set out on his own to design colorful—but tough and functional—men's outerwear. A year later he sold his outfit to Harvey Sanders' State-O-Maine, Inc. clothing company (Forbes, Nov. 25, 1991). The merged company took the Nautica name in 1993, with Sanders, now 47, as chairman and chief executive, and Chu as executive vice president and head of design. It has been a profitable partnership. From 1992 to 1997, the company's revenues and net income grew from $121 million to $387 million and $8 million to $44 million, respectively. With little debt and relatively small amounts of fixed capital, Nautica last year earned 23% on shareholders' equity. The company has made both men rich. Chu owns 3.9% of Nautica, worth about $45 million. Sanders owns 11%, worth about $131 million. If Chu and Sanders expect their sneaker business to further enhance their wealth, they will need to hustle. The business is getting crowded. Tommy Hilfiger has licensed its name to an athletic shoe produced by Stride Rite Corp. Ralph Lauren's Polo is teaming up with Reebok/Rockport. Sunglasses-maker Oakley, Inc. plans to introduce a line of sneakers in 1998.
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