Rolling off a cliff

by Rob Horning

21 August 2007


Today, the Wall Street Journal reported on the precipitous drop in the value of shares of Heelys, manufacturer of those rolling shoes that were popular a season ago with kids looking to break their necks. (I guess the WSJ is still good for something. My flight to quality and the FT won’t be complete until my WSJ subscription runs out.) My first reaction to this was delight; the shoes were a stupid trend, and there’s schadenfreude in seeing its inevitable demise. You have to wonder what sort of investor saw a sustainable growth potential in a business that sells novelty shoes to ten-year-olds? Optimistic neophytes, or opportunistic daredevils? Anyway, I started to wonder why I had anything invested myself in the fate of this company, even if it was only emotional investment. Why was I so pleased?

Initially, the failure of such companies as Heelys seems to prove that it’s a bad move to base businesses on frivolous fashion, which by extension seems to suggest that fashion itself is a dubious force, something better eradicated, like volatility in the markets. When the Heelys of the world fail, it should theoretically remind everyone not to get too wrapped up in fads, and to look elsewhere for engines of growth—to technology that breeds efficiency, for example. This is in keeping with my general skepticism regarding retail stocks, which are always dependent on fickle and unpredictable customers spending irrationally in a way I wouldn’t otherwise condone.

But if I’m hoping that the failure of fashion-forward companies somehow portends the end of the industry, I really need to consider more carefully this passage from the WSJ article:

Industry analysts said [Heelys’] sales drop stems from a more prosaic cause: An increasing number of youngsters said they would rather wear something else. Amy Braunstein, 14 years old, who was shopping at Dallas’s NorthPark Center mall last week, said Heelys were popular among her classmates two years ago. Now, the eighth grader said most children wear Nike Inc.‘s Converse shoes, leaving their Heelys at home. “They’re old,” she said.

If anything, Heelys’ failure demonstrates the remorselessness of fashion, and how deeply it has been entrenched even in the mind of preteens. It’s influence is far from showing any signs of mitigating; instead its stranglehold on culture grows stronger. Were Heelys able to establish itself and maintain its stature perpetually without having to come up with “new shoe designs, including nonwheeled sneakers and a wheeled boot”—pointless innovations (nonwheeled shoes sort of defeats the whole company’s raison d’etre)—then foes of fashion would have reason to be pleased. Instead, I’m thoughtlessly celebrating the opposite. This probably means that I actually take more pleasure in trends than I ordinarily admit to myself—I just happen to enjoy the side of the cycle when trends fade and companies fail rather than when they rise, like a craps player playing the don’t-pass line. Foolishly, I think this makes me a contrarian, and I pretend that I’m not really interested in the craps game at all, while I am making private little bets all the while.

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