Shades of L.A. Gear as Skechers' stock takes a tumble. (Up Front).

Investors are feeling an eerie deja vu at Skechers USA Inc., the Manhattan Beach footwear company that Robert Greenberg began planning within days of his 1992 ouster as chairman and chief executive of L.A. Gear Inc.

Greenberg built up that footwear company to nearly $1 billion in sales, only to see the brand's popularity, and company results, collapse.

Ten years later, Skechers is teetering on the brink of a similar precipice, having faltered within striking distance of that same $1 billion goal.

While no one predicts an L.A. Gear-magnitude fall, the parallels are hard to ignore.

"Is this another L.A. Gear? People seem to be asking that question," said one equity analyst. "The issue continues to come up, but I don't know how much of a factor it is."

Last week, Skechers stunned investors by reporting that the company would lose 25 to 35 cents a share in the fourth quarter, compared with October estimates of earnings of 3 to 8 cents. The sales target was reduced to a range of $160 million to $170 million, from $195 million to $205 million.

It was Skechers' third reduction in earnings estimates since September. The company withdrew its forecast for 2003, while it analyzed retailers' response to its spring line.

Skechers officials, who were traveling last week, did not return calls.

Skechers stock, which traded as high as $24.40 in April, fell to $8 last week, down 33 percent since the announcement and 26 percent below the June 1999 initial public offering price of $11.

There are important differences between the two companies--staffing with Skechers having $100 million in the bank and L.A. Gear being cash strapped 10 years ago. Still, the similarities are striking.

Like L.A. Gear, Skechers has used aggressive marketing to rise above other mid-tier athletic shoe brands and come within striking distance of industry leaders Nike and Reebok.

Skechers also appeals to the same teenybopper crowd that L.A. Gear did. When their tastes shift, as they have in recent months, previous favorites are unceremoniously dumped for the next "in" brand. And like L.A. Gear, Skechers executives gave no hint of the impending crisis, and in fact sold stock when the future looked better from the outside than it turned out to be.

In 1992, a U.S. district court ordered Greenberg and other former officers of L.A. Gear to pay $29.3 million to settle lawsuits brought by shareholders who accused them of issuing false statements to inflate the stock and conceal adverse information.

Greenberg and other former L.A. Gear officials also were ordered to pay the company $3.2 million. After an investor group ousted Greenberg, the new management made a partial settlement with shareholders, paying $5.5 million in cash and 1.4 million L.A. Gear shares. Then the new team, led by Mark Goldston, joined shareholders in going after Greenberg and other former executives.

Goldston, now chairman and chief executive of United Online Inc., declined .comment. (L.A. Gear reorganized under Chapter 11 bankruptcy protection in 1998. It remains a minor player in the women's athletic shoe industry.)

In 1995, two lower-level officials at L.A. Gear paid more than $1 million to settle Securities and Exchange Commission charges of insider trading and falsifying records. The two allegedly falsified reports in order to inflate earnings for the quarter ended Feb. 28, 1990.

Even without any financial shenanigans, small apparel companies like Skechers and L.A. Gear can give investors a volatile ride.

"You get 'em while they're hot and hope you can sell out before you take it on the chin," said Nelson Woodard, managing director of Dreman Value Management fund, which no longer owns Skechers shares.

This year, Skechers raised its full-year earnings guidance twice. As it turned out, much of the apparent strength was due to retailers ordering early for fall shipments, anticipating a possible dockworkers' strike. Less than two months later, on Sept. 10, the company issued the first of three downward revisions.

Meantime, insider sales activity was heavy. Between May 1 and June 20, seven Skechers insiders sold a total of 1.2 million shares, valued at $25.4 million, according to Thomson Financial. By far the largest of those sales was by Robert Greenberg, who unloaded 1 million shares on May 3, picking up $21.9 million.

On Nov. 25 -- two weeks before the latest earnings warning--Michael Greenberg, president of the company and Robert's son, sold 9,720 Skechers shares valued at $115,960.

"Management took stock off of the table when it got up into the high 30s (in 2001)," Woodard said. When the stock hit interim peaks in the teens and low 20s, he said, "management sold again, and that's enough for me."

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