Sportswear company takes new approach

THE BALTIMORE SUN

As Jack Dougherty, the youthful new chief of Columbia-based Head Sports Wear Inc., walked through Chicago's O'Hare Airport last winter, he paused for a moment to admire a Gap jeans advertisement featuring the lean and muscular $100 million man, Evander Holyfield.

"This," mused Mr. Dougherty about the two-time world heavyweight boxing champion, "is what Head should be about."

Athletic. Young. Hip.

By March, Mr. Dougherty had signed the boxer to a two-year promotional contract as part of his plan to jump-start the flagging athletic apparel and footwear company and broaden its name recognition through its sister company's reputation for tennis rackets and skis.

The deal, worth an estimated $300,000 to $500,000, could be risky, say sports marketing experts: Mr. Holyfield competes in a sport for which Head doesn't make any equipment or clothing, and the boxer's appeal is considered limited to those who follow the sport.

"It's a surprising target profile for such a company. Demographics in this business is everything," said David Burns, founder of Burns Sports Celebrity Service in Chicago.

Mr. Dougherty doesn't see the Holyfield deal as a risk. Adventurous maybe. But to the enthusiastic executive, the company needs to move in new directions to rebound from the millions in sales revenues it's lost over the past five years.

"Evander's character supersedes any sport, so even though Head is not into boxing, it didn't make any difference," said Mr. Dougherty, 41, a former Gore-Tex executive who is Head's international president and chief executive officer. "We are trying to make Head more athletic and younger."

To achieve that end, the company is targeting the booming athletic apparel and shoe market among 20- to 40- year-olds. Industry statistics show they are the key buyers of athletic shoes, apparel and equipment. The company also has its sights on a share of the exploding cross-training and outdoor markets and is launching lines of apparel and footwear designed specifically for those pursuits.

The effort will be aided by the recent reunion of Head Sports Wear and its sister company, Head Sports Inc., which produces and markets skis, tennis rackets and golf clubs under the Head name, under a new corporate parent. The companies, which had been split apart in the 1970s, will now be able to bring their products together for marketing and streamlined distribution -- an element that could be very advantageous, say industry experts.

The sportswear company also has been fortified by an infusion of $150 million in capital from its new parent, Austria Tabak Werk A.G., a state-owned tobacco manufacturer and distributor of tobacco products, which bought Head in March.

Head's adventurous game plan:

* Getting Head's new lines of mass market apparel and footwear, which are not designed for any specific sport, into some of the nation's biggest and well-known "category killer" sporting goods stores, such as Sports Authority and Sports Mart.

* Setting up Head "concept shop" areas or "boutiques" in those stores and in some of the nation's well-known department stores, such as Bloomingdale's and Nordstrom.

* Launching geographically and demographically targeted advertising to build brand label awareness among youths and developing a new image for Head that appeals to a broader market (hence the Holyfield contract).

* Unifying marketing and distribution of Head "hardware" -- tennis rackets and the like -- with Head apparel and footwear.

"You cannot stand still in this industry and expect to survive. In a lot of ways that's exactly what happened to Head. Nothing new happened with the brand," said Mr. Dougherty, an affable man whose ebullient enthusiasm is considered infectious inside the company.

"Our biggest market is right here in the United States, and let's face it, Americans always are looking for something new."

The sports apparel and footwear company he joined in 1993 had become something of a wall flower. Its clothing and shoes, while of high quality and design, had little marketing pizzazz behind them. Athletes signed for endorsements were unknown outside the tennis and ski racing worlds. And the company was losing money. A lot of money.

Mr. Holyfield, thought Mr. Dougherty, would make "the perfect athlete" to represent the Head label and help rocket-launch the company's planned bid for a larger piece of the global athletic apparel and footwear markets and renewed profits.

Concept shops on the way

Head's biggest venture, say executives, is the rollout of Head "concept shops" or "boutiques" in some of the nation's largest sports-oriented retailers. Initially, 20 boutiques are planned. Head has opened a concept shop in Paragon, a high-end sports outfitter in New York. Shops are planned to open in August in the Ski Market, a regional chain in New England.

Concept shops are planned for Sports Authority, Sport Mart and a new competitor in the industry, New Jersey-based Sneaker Stadium. These "category killer" stores, which carry a broad inventory of products and discount popular items to draw customers, cater to the middle-brow and price conscious. Head will have to pay for furnishing and designing the boutiques.

The boutiques should broaden awareness and the distinction of the label, said John Horan, publisher of Sporting Goods Intelligence, an industry newsletter based in Glen Mills, Pa.

The launching of the concept shops will be matched with a cable and network broadcast advertising campaign in eight target cities, including Baltimore, Washington and Philadelphia, where the company believes it can make significant sales inroads, said Guy Grubel, executive vice president of Head Athletic, the division charged with marketing and distribution of Head's mass market lines.

Print ads will appear in national magazines, such as Rolling Stone, Men's Health and Vanity Fair, read by the demographic target.

As Head moves after the broader market, it will have to keep a close eye on its tennis business, which along with golf comprise more than 30 percent of its apparel and shoe business. Industry giant NIKE is going after the tennis apparel and shoe market and has signed promotional deals with Andre Agassi, Jim Courier and Pete Sampras, said Mr. Burns of the Burns Sports Celebrity agency.

Two other key strategies for Head:

* A new line of apparel and footwear, hitting the market now, aimed at people who participate in several sports such as aerobics, running and tennis -- called cross-training.

* Release this fall of a new line of outdoor-oriented boots and outerwear to be called Head Exploration. The line is targeted at customers interested in hiking, skiing and related outdoor activities.

The cross-training and exploration lines will be pushed heavily, but face competition from many big names in the outdoor market -- Columbia, Timberland and L.L. Bean to name a few.

Nike and Reebok, which last year had 32 percent and 21 percent share of the athletic shoe and apparel market, respectively, have already capitalized on the explosive growth in the cross-training market in the United States. Those companies also have set their sights mightily on the growth trend in outdoor-related shoes and clothing.

What's to be gained?

There's big money at stake: Sports attire and shoes ring up an estimated $7 billion in annual sales worldwide. Athletic wear is no longer confined to athletic activities. It's purchased as fashion, as likely to be worn for a night on the town as it is on the tennis court or links. Athletic clothing and footwear has seen enormous sales growth this decade. and it's expected to grow more as new middle-class markets are exploited in Europe, Japan and Asia, say industry analysts.

"The whole sporting goods market is gravitating to the middle-income market. You just can't make a living off the country club market anymore," said Mr. Horan, of the Sporting Goods Intelligence newsletter.

Head's advantages in this enormously competitive market, said Mr. Horan, lie in the fact that the company offers products in a wide range of different sports -- skiing, tennis, golf, cross-training and outdoor. That is unique in the sporting goods industry and could be played to a distinct advantage with the right marketing, he said.

None of Head Sports Wear's apparel or clothing is produced at the Columbia headquarters. About 116 are employed there and at its Jessup distribution plant. Like most big name clothing and shoe companies Head contracts out production work. About 25 percent of its product line is manufactured in the United States, the rest overseas, mostly in the Pacific Rim.

Virtually all Head skis and tennis rackets are manufactured in Austria.

Looking back -- and ahead

If Head is successful in its campaign, it could rocket the company from a tiny niche marketer of athletic apparel and footwear into a significant player, industry experts say.

It also represents a major departure from the company's history.

Head was founded in 1950 by the late Howard Head, an eclectic engineer and Cockeysville resident who revolutionized the ski and tennis industries with designs for metal skis and aluminum tennis rackets.

In 1966, the company ventured into clothing and apparel, selling its products only in specialty shops.

The strategy worked. For a while. Sales of Head tennis and golf shoes and apparel and ski wear peaked in the late 1980s at $100 million worldwide -- $69 million of that in the United States.

But by the mid-1980s, Head's traditional, low-key apparel and shoe designs had been upstaged by the likes of Nike and Reebok, which drew inspiration from the brash and youthful urban scene. And the company's equipment and apparel lines had been broken up in leveraged buy-outs, creating confusion and inconvenience for retailers.

In 1989, Head Sports Wear began a precipitous financial descent.

U.S. sales between 1989 and 1994 plummeted 14 percent, from $70 million to $61 million.

The company remained profitable, but those profits weren't up to company expectations, said Clayton P. Fisher III, Head Sports Wear's president for U.S. operations.

Today Mr. Dougherty and a new team of executives he's assembled in Columbia are braking the slide and projecting a turnaround.

Apparel and footwear sales revenues are expected to surpass $90 million next year and jump to $152 million by 1997, said Mr. Fisher.

Stronger marketing, a streamlined distribution system and an emphasis on service to retailers, will ensure that growth, said Mr. Grubel, the executive vice president of Head Athletic.

A cornerstone of the new sales growth is a greatly expanded sales force. For years, Head Sports Wear served retailers with only five sales agents for the entire nation. In the past year, that force has been beefed up to 42 agents to serve mass retailers and 21 to serve specialty shops, said Mr. Grubel.

The company's sales growth projections are but a glimpse of the incredible market potential" for the Head brand, said Peter Stangle, managing director for Head Sports Wear's Austrian parent.

It is not unthinkable, said Mr. Stangle, that annual sales could hit $500 million by the end of the decade for Head Sports Wear's lines of footwear and clothing. That figure may pale when compared to sales at athletic shoe ands apparel industry giant NIKE, which projects $6 billion in sales by the end of the decade. But neither Mr. Dougherty nor Mr. Stangle say they are interested in attempting to make Head a behemoth like NIKE.

"We want to still retain the upscale image and customer," says Mr. Stangle. "But the industry has changed substantially. You cannot be a niche marketer anymore and survive."

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