Three years since it emerged from bankruptcy, you might say The Walking Company has hit its stride. The specialty retailer of comfort shoes, now under new management, has seen same store sales increase each month for the past two-and a half years, and by the end of the year officials expect that the company’s revenues will have doubled compared with levels two years ago. “I think they’ve done a phenomenal job since the Big Dog purchase,” said Mark Diehl, senior vice president of sales for Dansko Inc., one of the brands carried at The Walking Co. “They made a tremendous turnaround.” Last month, TWC inked a $3.3 million deal for a new headquarters facility in Westlake Village. The offices will house about 25 employees at opening, but that number is expected to grow as plans to double the number of stores in the next four years materialize, officials said. “The Walking Company was always an excellent concept,” said David Wolf, senior vice president for marketing at Big Dog Holdings Inc., which acquired TWC early in 2004. “I think they made one serious mistake, which is they tried to expand very rapidly with a risky and unproven format. They paid a serious financial price for that.” Launched in 1991, TWC expanded rapidly thanks to a business model that filled a niche for comfortable, high-end footwear brands such as Ecco, Mephisto and Dansko not typically available in other types of footwear stores. But the company ran into difficulty when it started building stores that were two and three times larger than its original format, striking far more expensive lease deals than it had previously arranged or could support. The Walking Company shed about one-third of its stores by the time it emerged from bankruptcy protection in 2003, and was operating about 70 locations when it caught the eye of Big Dog’s management team. Turnaround specialists, the executives had earlier brought Big Dog out of bankruptcy when sales for the retailer of novelty shirts were just $3 million. They rebuilt the Santa Barbara-based company to $100 million in sales, taking it public in 1997. The executives saw in TWC several things they liked: an aging baby boom generation that was boosting the demand for comfort footwear; an industry transformation underway creating more fashionable styles for the category; and the growing acceptance of casual dress for almost all occasions, including the workplace. At the same time, selling the footwear required a trained and knowledgeable sales team, creating a kind of barrier to entry for the big box retailers that had infiltrated most of the rest of the retail footwear industry. In 2004, Big Dog acquired TWC, which at the time was selling some $65 million worth of shoes, for $15 million in a cash, stock and assumption of debt. “We wanted to become the largest retailer of comfort footwear in the world,” said Wolf. “Then the other thing was we worked hard to focus on identifying exactly what we wanted our core business to be.” TWC had expanded into accessories and styles that weren’t what Wolf called “authentic.” “We really only wanted to sell products that had true comfort features, rubber souls, thicker foot pads, better structure and support for your feet,” he said. “It’s not just marketing spin. There are real comfort features that go into these products.” Next the company redesigned the stores and marketing materials. That done, TWC began to acquire other footwear retailers including Footworks and Steve’s Shoes in a move designed to expand the company into new markets in Las Vegas and the Midwest. The company has also been able to leverage the infrastructure in place for Big Dog, including IT systems and warehousing, and pump those savings back into the bottom line. “When you take that experience (of the management team) and you are also able to leverage your systems and acquire another company into that same infrastructure, then the cost savings are substantial as well,” said Wolf. Big Dog, now a $179 million company, currently operates about 140 TWC stores. Although the company does not break out revenues for TWC, its most recent financials for the second quarter ended June 30, noted that the division had seen same store sales, considered a key indicator, increase 5.9 percent. In their most recent annual letter to shareholders, Big Dog officials credited The Walking Co. with much of the company’s success in 2005. “Our plan is to continue to grow,” said Wolf. “We only have 140-plus locations and without even changing distribution channels the expansion possibilities are significant.” The improvement has not been lost on vendors. “For Dansko, it brings a great opportunity for us to get some national exposure in a good atmosphere where size and fitting and attention to the customer is important,” said Diehl.
