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Shoe Co. Puts Its Best Foot Forward

Like its mythical namesake, Phoenix Footwear Group is recovering from a near-death experience and rising once again.

Slammed by the Great Recession, the Carlsbad manufacturer of women’s shoes sold off several divisions, focused on a few core brands, and began rebuilding itself at a time when many folks were inclined to put off buying a new pair of shoes.

Annual revenue dropped from approximately $125 million in 2007 to a low of $16 million in 2011 as the company retrenched. This year, Phoenix Footwear is on track to break $20 million in sales, and make a profit, said Jim Riedman, chairman and chief executive officer.

“It’s been a real E-ticket ride,” Riedman said of the past six years.

The restructuring Phoenix went through was rough on many people. From a peak of approximately 200 employees in 2007, the company now has only 43 workers, including 13 at its Carlsbad main office.

“Obviously, our first order of business was to divest and scale back as quickly and dramatically as possible, but it’s tough to shrink your way to prosperity,” said Riedman, who took over as CEO in 2011.

’Net Gains

Although Phoenix Footwear brands have long been sold in such major department stores such as Nordstrom and Dillard’s, it’s sales really gained traction in recent years as more consumers went online to find their shoes, Riedman said.

“The one thing that really sustained us during all this (restructuring) was the shift to online shopping,” he said. “That allowed us to re-invent ourselves.”

Strapped for cash during the recession, many online shoppers scoured websites seeking bargains, and were drawn to the prices on Phoenix’s main brands, Trotters and SoftWalk. “A lot of people went online to find a particular size and got to see our stuff,” Riedman said. “Today, more than 50 percent of our sales are either driven by or directly Internet-related.”

Among some of the largest online purveyors are Amazon.com, Shoebuy.com, and Zappos.com.

Megan Twigg, a buyer for Zappos.com in Las Vegas, said her company, owned by Amazon, has been selling Phoenix-made shoes for about five years, with positive results.

“They’ve really stepped up their styling in the last few years and become more fashion-forward,” Twigg said. “I think they’ve done a fantastic job of meeting their customer needs.”

Once a brand that targeted mainly older women, SoftWalk shoes such as the Napa are appealing to women in their 30s, and gaining sales. Twigg declined to provide any numbers.

Riedman relocated Phoenix Footwear to Carlsbad in 2003 from Old Town, Maine, where the company had been operating for several decades. The company’s roots can be traced to New York in the late 1880s.

Riedman said he saw plenty of growth opportunities in the business, in which he had a sizable stake, but not in Maine. Attracting top talent in the shoe industry would be much easier in Southern California than in Maine, he said.

Intent on growing through acquisitions, Phoenix purchased five business lines over three years and grew its sales from about $30 million to about $125 million by 2006. Among the key purchases were such top brands as Tommy Bahama, H.S. Trask, Royal Robbins, and Altama, a maker of combat boots.

While making those acquisitions and consolidating the varied business lines, Phoenix took some $62 million in debt, and when the financial crisis of 2008 hit, the company nearly got the boot.

“Orders cancelled, and a lot of our customers went out of business,” he said.

The company reported revenue of $75 million in 2008. That fell to $19 million in 2009 and Phoenix recorded two more years of declining sales before turning it around in 2012, when it did $16.7 million. Last year, it grew 15 percent over 2012’s sales to $19 million.

Riedman thinks Phoenix has definitely risen from the ashes and is on pace to grow by about 20 percent. Given the pipeline of business currently in place, and maintaining similar annual growth rates, reaching about $50 million in sales within the next three to four years is realistic, he said.

Consumers seem to be getting more confident about spending money on things such as shoes, especially women, who make up a majority of its customers. Asked why Phoenix dropped making men’s shoes, Riedman said, “Women buy a lot more shoes and are willing to pay more for them than men. It’s just a much larger market.”

Manufacturing Options

Like many other apparel manufacturers throughout the nation, Phoenix makes its shoes in China. However, he’s not pleased with the arrangement, and decried China’s rising labor costs and unfavorable currency exchange rates that hurt profit margins. The company is now researching potential manufacturing plants in Vietnam, where costs are even cheaper.

While being a public firm has its upside, such as attracting key investment partner Greenwood Investments Inc. of Massachusetts, which now owns about 50 percent of the business, stock of Phoenix hasn’t taken flight. In the past five years, company shares, traded under the ticker PXFG, have risen from the mid-30s to the mid-60s — in cents, not dollars. Still, that’s double what it was and it is inching back to a buck on the always volatile Over the Counter Bulletin Board exchange.

PHOENIX FOOTWEAR GROUP INC.

CEO: Jim Riedman

Revenue: $19 million in 2013; $16.7 million in 2012.

No. of local employees: 13

Headquarters: Carlsbad

Year founded: 1882

Stock Symbol and Exchange: PXFG, Over the Counter Bulletin Board.

Company description: Manufacturer of women’s shoes through two main brands, Trotters and SoftWalk.

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