Skins Footware: A Next-Generation Crocs?

Stan Berenshteyn & Dmitriy Vilenskiy submit: One of our favorite stocks to watch over the past two years has been Crocs Inc. (CROX). In retrospect, it should have been a pretty easy prediction that the product would catch on. Though we cannot go back in time, our hindsight can give us a better perspective about what makes a winning stock. We can look at high growth companies like Crocs, and use the elements that made them successful to help us isolate another potential winner.

The concept behind Crocs is fairly simple: produce very light, foam like footwear that is comfortable and convenient to wear. But when you take a look at the shoe, you can’t help but think; why didn’t something like this catch on a decade ago? The problem for some investors who did not cash in on the Crocs success story, however, is that getting in on it now seems very expensive.

We are not ones to criticize CROX - it is a stock with a lot of momentum, even in face of the market’s downturn, this stock has sustained with impressive resilience. But for those who are uncomfortable buying CROX at the current price, we might have found a perfect alternative: Skins Footwear (SKNN.OB).

Skins Inc. has a patented modular shoe system, an original concept for footwear that should have been developed ages ago; it’s a simple, yet elegant, design that can only be likened to a result of an experiment conducted by Dr. Scholls, Paris Hilton, and NASA. Skins offer a two part, interchangeable, shoe structure consisting of a flexible base called the bone and an outer layer--a collapsible Skin. The Bone needs to be purchased only once, and can then be fitted into any number of skins, which can very in fashion and form--from sneakers, to suede shoes, to formal leather footwear.

One fairly obvious benefit is for those of us who travel. The Skin is fully collapsible without the Bone in place, so you'll be able to pack considerably more Skins, with additional weight benefits (they're light), in the same space you would fit conventional shoes. This type of shoe is also primed for remarkable growth for online retailers, since consumers who already own the Bone could purchase Skins online without fear of the shoe not fitting once it arrived. Consumers are not the only ones that stand to benefit.

The unique Skin and Bone design will allow Skin Inc to save on manufacturing materials and costs of shipment and storage. Other benefits in manufacturing are the elimination of stretching, shaping, and stiffening normally found in footwear manufacturing. The shoes are set to retail at $150-$300, with the first collection of 25-30 styles for both genders.

What made products like Crocs or UGGs shoes successful was their original design, and an exclusivity that was created as a result of their price points. While fashion maybe hard to predict, it tends to have the same repetitive theme: the more expensive something is (or the harder it is to acquire by a peer group) and the more original it is (less it is like anything else on the market) it can start to be a candidate for a popular item.

The retailers will resale at 100% markup on the shoes, which Skin will sell to them for about $75/pair. Since these shoes are just beginning to hit consumer shelves in stores like Littles of Pittsburgh, Footwear ETc., World Class Footwear, Abbadabbas, J Stephens Footwear, and Sportie LA, the company is still operating at a loss of just over $6,000,000. However, based on management's projections on initial sales to retailers, we expect Skin to post gross sales revenue between $648,000 - $756,000 by end of December '07.

We are eagerly awaiting the rollout of Skins at retailers nationwide, and the response from daring consumers.

DISCLOSURE: The authors of this article do not have a position in the stocks mentioned above.

Comments

[yourfilled]

Oh really, why not show a picture of this product. If I will wear it, I will buy the stock.

[DmitriyVilenskiy]

yourfilled:

You can find images and more info on the product all over the internet, here's an interesting clip: youtube.com/watch?v=49...

[EarningREady]

Originality aways wins over the fashion forward crowd. Like Crox and UGGS Skins has a shoe concept that most people have never seen before. I purchased a pair of Skins footwear and 2 weeks later purchased the stock because I like the shoes and I like the fact they were smart enough to patent their shoe. Protection from competition provides safety for shareholders.