Pete Rose’s Skechers Deal Isn’t as Crazy as It Looks

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Pete Rose may be the most controversial man in sports. Almost 25 years ago, baseball’s all-time hits leader was banned from the MLB for life, in light of a lengthy betting scandal. Although he officially came clean in 2004, and opinion polls indicate the public has largely forgiven him, Rose remains on the outside of the league looking in. So is he still marketable?

The shoe deal
According to Skechers USA (NYSE: SKX), the answer may be yes. Earlier this week, the footwear giant announced it is partnering with Rose to promote its men’s Relaxed Fit line. Beginning this fall, the company plans to feature him in a wide-ranging marketing campaign that will include at least one TV commercial and several print, online and outdoor ads. NFL retirees Joe Montana and Joe Namath – each 57 and 70 years old, respectively – also endorse the shoes, so it’s clear what demographic Skechers is aiming for.

Digging deeper
What’s less clear is just how much this senior-centric strategy has worked. Originally introduced in 2012, the Relaxed Fit line’s debut did coincide with a period of significant growth for Skechers. After a disastrous 2011 in which total sales fell by 20%, the company righted the ship a year later, and registered revenue growth of 18% in 2013. And even better, in the first quarter of this year, it reported record sales of $546.5 million.

But unless you have unfettered access to the company’s books, it’s difficult to know just how much the Relaxed Fit line actually helped. Most experts attribute Skechers’ recent expansion to the success of its own retail stores and sales of its performance shoes. Only in its latest quarterly conference call (via Seeking Alpha) do we get a hint from CFO David Weinberg that the Relaxed Fit line has been among the factors “paramount to…growth.”

Nevertheless, the company’s new deal with Rose reveals it will continue to market the shoes aggressively. Past annual reports indicate Skechers’ female patrons outnumber males by a ratio of almost two-to-one, and it’s widely believed its core demographic is between the ages of 12 and 24.

Hence the reason the company is hoping a collection of retired sports stars will sell more Relaxed Fit shoes: It’s searching for ways to appeal to an older customer base.

An important question
Still, was Pete Rose the right choice? Skechers could have theoretically gone with an ex-athlete who’s been a bit, well, less vilified by the media in recent years. Off the top of my head, a short list of candidates includes: Michael Jordan, Jack Nicklaus, Wayne Gretzky and Magic Johnson. Heck, even Shaq would’ve been interesting, and probably funnier than Rose.

That group has proven marketability, and led by Jordan, each of these former athletes make at least $10 million a year from endorsement income, according to Forbes. Of course, this may also explain why Skechers went with Rose – he’s probably cheaper than other alternatives. Although estimates vary, his endorsements likely hit a high of around $1 million a year, and that’s mostly from autographs. Additionally, Skechers isn’t really known for its propensity to spend a boatload of cash on multi-million dollar endorsement deals like Nike (NYSE: NKE) or Adidas.

For my money, I’d think the size of Rose’s agreement with the company is nothing larger than six figures in full. At that type of cost, it’s a relatively low risk move if the next Relaxed Fit ad campaign backfires. There are always other ex-athletes to pair with Joe Montana and Joe Namath.

The bottom line
At the end of the day, the decision to sign Pete Rose may seem a bit crazy to some. Given that Skechers still has room to expand in the senior men’s segment, though, it ultimately makes sense. And as long as the company stays away from using gambling puns as slogans, it’s a move that could pay off.