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organs such as the liver or pancreas. Despite a longtime association with film, “we’re a company that specializes in managing cells,” says Yuzo Toda, the chemist Komori has entrusted to lead Fujifilm’s move into cosmetics and pharmaceuticals. “We “We look for look for game changgame changers, ers, areas which areas which Fuji can win at. Fuji can win at. Controlling micro Controlling micro environments? environments? We We know that.” know that.” —Yuzo Toda, Komori’s makeFujifilm chemist over began a decade ago, when the ascent of digital cameras and smartphones began eroding film sales. He pushed engineers and executives to take a closer look at how the company ensured precision when making photo film; the same manufacturing techniques, he reasoned, could be used on other products that require the precise handling of small molecules. Fujifilm applied its expertise to new businesses, including pharmaceuticals and the films that hold LCD screens together. In 2008 it acquired drugmaker Toyama Chemical, the producer of an antiviral medicine used by some Ebola patients in West Africa last year. Photocopier machines and printers have become Fujifilm’s largest source of revenue since film’s slump, but Komori sees the biotechnology and pharmaceutical operations as more promising sources of growth. Investors have so far applauded the shift, sending the company’s stock up 66 percent over the past year. “I can praise their efforts for revenue diversification with businesses such as regenerative medicine [and] cosmetic items,” says Minoru Matsuno, president of Value Search Asset Management, a Tokyo-based investment adviser. “For another stage of growth, they need more aggressive acquisitions and strategic alliances.” Fujifilm managers, however, say Komori’s push to get employees to come up with new applications for their existing expertise will be a big part of the company’s future, as well. Akira Kase, who heads Fujifilm’s biopharmaceutical ventures from Tilburg, the Netherlands, remembers many such brainstorming sessions with Dutch colleagues a decade ago. One of their ideas, a filter used during the purification of natural gas, will soon reach the market. “What you’re seeing right now is just
the tip of the iceberg,” says Toda, who was promoted to executive vice president in June. “We have decades of technology and know-how backing us, and now that we’ve opened up these possibilities, expect much more to come.” —Natasha Khan and Kiyotaka Matsuda The bottom line Despite the contraction of its photo-film business, Fujifilm logged record earnings of $961 million in its last fiscal year.
Shoes
Skechers’ Lesson From A Fad That Flopped It learns how to avoid getting clobbered by boom-and-bust styles “You have some investors that say leopards don’t change their spots”
Five years ago, Skechers’ Shape-ups shoes were the runaway leaders in “toning,” a new category of sneaker that promised to help wearers slim down and strengthen their butt muscles. Toning-shoe sales grew more than twentyfold in only three years, from $50 million in 2008 to a peak of $1.1 billion in 2010, according to researcher SportsOneSource. Skechers owned about 60 percent of the market, and roughly a third of its $2 billion in revenue that year came from toning. In February 2011 the company ran an ad during the Super Bowl showing Kim Kardashian bidding farewell to her personal trainer in favor of a pair of Shape-ups. By then, however, the shoes were quickly moving from fad to fiasco. Customers were increasingly buying Shape-ups at a discount, and millions of pairs sat unsold because Skechers
had overordered. “There’s just too much inventory,” Chief Operating Officer David Weinberg told investors on an earnings call 10 days after the Super Bowl ad ran. It didn’t help that the Federal Trade Commission soon began investigating Skechers and its rivals for false advertising about such shoes’ health benefits. In May 2012 the company denied wrongdoing but agreed to pay the FTC $40 million to settle charges that it had deceived customers, and it was barred from making unsupported claims about weight loss and strengthening. Now Skechers is flying high again. Its second-quarter sales jumped 36 percent this year, to $800.5 million, and its stock market valuation soared from less than $600 million at the end of 2011—the low point of the Shape-ups flub—to more than $8 billion today. This time no single trend is responsible—or could singlehandedly crater the company’s fortunes. “In the past we’ve had some categories that grew significantly better than others. It moved the company around and made it a lot more volatile than we would have liked,” Weinberg says, “but now we’ve got to the point where we can be successful in multiple categories.” It turns out that Shape-ups helped Skechers, if nobody else, get lean. The company has shortened the lead times on its factory orders and now plans for obsolescence by keeping new products in the pipeline to replace the old. “Shape-ups was the best thing that ever happened to them,” says Sam Poser, an analyst at Sterne Agee CRT. “They’ve learned how to control it better.” This self-control even includes asking retailers to cut back on their orders, according to Matt Powell, who follows the footwear industry for NPD Group: “There is a great deal of discipline in terms of how much product they’re selling into the market.”
Wild Swings in Supply Skechers cools its inventory growth rate Skechers introduces Shape-ups, which promise to tone your backside
Today the company’s revenue stream is far more diverse, and inventory growth remains under control
Inventories soar, and an ad for Shape-ups featuring Kim Kardashian airs during the Super Bowl
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