CNN Interview with John Ranelli

John Metaxas, anchor: And Stride Rite coming in two cents above estimated earning twenty-seven cents per share. Still, BT Alex Brown says it’s cutting Stride Rite from buy. well, let’s get–let’s get that rating cut accurate before we give it to you. Let’s just show you the stocks. FDX up one and seven eighths and Stride Rite down an eighth and they are cutting them to buy from a strong buy — Stride Rite that is.
Here to go over Stride Rite’s numbers with us and offer his vision for it’s future is the company’s Executive vice President John Ranelli. And welcome to In Play.

John Ranelli (Executive Vice President, Stride Rite):
Well, thank you very much for allowing me to come. It’s a great day for Stride Rite and it’s a great day to be here.

Metaxas: Well, sure, sales up seventeen percent, profits up fifty-nine percent. Now Stride Rite is a company that I remember from my youth and maybe many of our viewers do. And you have brands such as Keds, which we all used to wear back in those days. It’s needed a turn around plan though. How is that going?

Ranelli: It’s going very well. In fact, I think the numbers indicate that the — our strategy in the turn around plan — and that’s becoming a new company — is well underway. In fact, we have more brands today and more relevant brands than we have had in the history of the company. As you know, our sales declined from about six hundred million in 1992 to about four hundred and fifty million in 1996. So we had to put a plan together to revitalize our sales and profits and it seems like it’s on track.

Metaxas: The brands were kind of tired at that time?

Ranelli: Yes. I think we hadn’t invested in advertising and product development as much as we should have and that was one of the key goals. one of the two things that we did is the first was to increase the number of brands and we went from three brands to seven. And the way we did that was through licensing. And then the second thing that we did is, with our own brands. We invested in advertising and product development. The success of the licensing brands are that we went from zero percent of our sales up to twenty percent of our sales in this quarter.

Metaxas: You’ve licensed with Tommy Hilfiger.

Ranelli: Yes, we have Tommy Hilfiger men’s, we have Tommy Hilfiger women’s, we have Levis, and we have Line–NineWest Children’s.

Metaxas: What other plans to develop the company’s potential? More brands perhaps? And at what point does it become too scattered? In other words, how many brands is too many?

Ranelli: In ’97, ’98 I think we’re focusing quickly to get revenues up through the license brands. ’98, ’99–a big piece of our increase because it took longer to renovate our–our current brands and they will provide the growth in ’98 and ’99. In year 2000 and 2001 we’re looking for acquisitions also.

Metaxas: You have a lot of cash in your balance sheet right now?

Ranelli: Yes, we have about twenty million dollars worth of cash and we have no debt. one of the beauty of a license–license brands is we were getting–able to get significant revenues without having to commit our balance sheet. So we still have a balance sheet that we can commit to further grow our company in the year 2000 and beyond.

Metaxas: S–s–so you think acquisitions rather than more licensing extensions is–is the–more the area you’re focusing.

Ranelli: That’s exactly correct.

Metaxas: Your Chief Executive, Robert Segal is going to be leaving, I understand, at the end of the year. As Executive Vice President, might you be in line to succeed him? Have any plans been made?

Ranelli: The board has formed a committee and, as the board should, I think they’re very carefully considering candidates both inside and outside of the company, and looking for the right talent and the right background to lead the company into the future. And I expect to be a candidate for the position.

Metaxas- Now your company, as I understand it, only has about six percent of your revenues from overseas. In this period, has that actually been an advantage?

Ranelli: As a matter of fact it has. In fact our profits from overseas are flat given all the economic problems that are going on over there and we’re very comfortable with that. But our competitors have about thirty percent of their sales overseas, so we think that’s a big advantage going in and provides us an opportunity for growth. Not only do we have an acquisition in the year 2000 and beyond, but we think we’ll be in a great position to expand our international business to provide our growth in that period as well.

Metaxas: And, very quickly, I remember wearing Keds as a kid. They were canvas, they came either in high top or low cut, black or white, that was it. It’s a very different brand right now isn’t it?

Ranelli: That’s exactly correct. It’s much more fashionable and much more comfortable than it has been in years.

Metaxas: All right. John Ranelli of Stride Rite. Thanks very much for joining us today.

Ranelli: Thank you very much.

Date: September 24, 1998
Time: 1:30-2:00pm
Network: CNNfn
Program: In Play