K-Swiss’ new owners see a wealth of opportunity for the brand in China.
On Friday, Xtep International Holdings, a Hong Kong-based Chinese sportswear retailer, finalized its acquisition of KSGB, the Los Angeles-based footwear company that owns K-Swiss, Palladium and Supra, for $260 million. The two parties agreed to the terms of the deal in May, and officially closed the deal on Aug. 2.
As a result of the acquisition, KSGB will have access to Xtep Group’s resources in retail, supply chain, and research and development in China. K-Swiss president Barney Waters said Xtep’s robust supply chain makes “45 million pairs of shoes a year” and “40 million apparel pieces a year” at its own factories. He said the plan for K-Swiss is to “find success in China and expand that in other markets.”
In March of 2018, K-Swiss had operated some 200 branded stores in Japan, the Philippines and Thailand under a distributorship arrangement and had plans to double that number. However, Waters said the brand is “not strong in China,” a position it hopes to change under Xtep.
“We have business but we’ve been missing the biggest opportunity in China. Xtep will help us unlock that,” he said. “To have an American brand in the market is even more desirable. That’s huge for us and probably the biggest growth opportunity for us in the long term.”
Palladium, on the other hand, is successful in China, with upwards of 300 stores. And the acquisition will “accelerate that.”
As for the third brand, Supra, he said, “It doesn’t have a footprint in China right now.” He added that the company intends to “find them a partner to help them get started in China.”
Xtep initially produced athletic footwear for other brands before launching its own label in 2002. Founder, chairman and chief executive officer Ding Shui Po, made five shoes a day in his backyard when he was first starting as a footwear manufacturer in 1989, and today, he leads a publicly traded company that operates 6,400 stores in China with sales of nearly $2 billion. Waters said that Po is a “longtime fan of K-Swiss,” and was waiting for the right time to acquire the brand.
Waters said the brand will push its heritage in China. “As the brand rolls out in China, I think they will lead more on the strengths of our classics and retro athletics, reestablishing the authenticity of our history. We’ll start by establishing the roots of our brand.”
The acquisition doesn’t mean that K-Swiss is leaving the U.S. market, however. Waters said the brand has “grown three years in a row and returned to profitability” here.
“A strong U.S. brand is important to the Chinese consumer,” he said. “We will focus on building the brand’s voice in the U.S. market and make strategic investments in the retail business in China. And one will help the other. We feel very bullish about our future.”
Xtep Global Brands Group president Michael Yuan will oversee KSGB with Xtep Corporate development director James Ting as chief financial officer, and they will both be jointly based in Hong Kong and Los Angeles. They also comprise a newly formed executive committee that will manage daily operations of KSGB alongside Waters, Palladium president Christophe Mortemousque, Supra president Steve Harden, vice president of supply chain Helen Hong and chief human resources officer Rhonda Elliott. Waters will manage the leadership at the brand’s Los Angeles office.
The acquisition of K-Swiss follows Xtep’s joint venture agreement with Wolverine World Wide Inc., to grow Merrell and Saucony in China, Hong Kong and Macau.