Stanley Gold's blunder: the L.A. Gear deal.

Stanley Gold used to be known as a corporate turnaround genius, an investor who took floundering businesses and made them live again.

But that was before L.A. Gear Inc.

As chief executive and chairman of the long-struggling Los Angeles-based sneaker maker, Gold has met his match.

But how to get out?

The company has reported five straight years of red ink since Gold took over in 1991 - about one-quarter of a billion dollars - on shrinking revenues.

As L.A. Gear has sold about 110 million sneakers in the five-year period, reported losses in the last five years work out to about $24 per pair.

On the Big Board, L.A. Gear stock has tumbled from $11.90 a share pre-Gold, to $2.625 a share, in trading last week.

Even those numbers, striking as they are, don't tell the entire story of a company that has experienced a series of management shifts in recent years.

"Gold's mistake was buying a fashion company, and getting rid of the man (founder Robert Greenberg) who designed the fashions," said one investment banker who asked not to be identified. "This is not widgets. It is not insurance. There is nothing so capricious as selling fashion to youth."

While Gold was charged with getting rid of Greenberg in 1992, he has not been able to establish a steady management team to succeed Greenberg.

An early candidate, the then 38-year-old turnaround guru Mark Goldston - author of a book entitled "The Turnaround Prescription" - was hired from Reebok Inc. to be president and chief operating officer, and brought along 45 managers with him.

Goldston lasted less than three years, stepping down in June 1994. The company turned a profit in only one quarter during his tenure.

More recently, the company in September 1995 hired Jim Moodhe, former president of the sneaker division of Los Angeles-based Guess? Inc.

An 18-year shoe industry veteran, Moodhe was touted in the 1995 annual report as new top gun of the crucial marketing and design of L.A. Gear shoes.

But last week, company president William Benford said Moodhe was gone.

Through all the turmoil, Gold has been noticeably absent from view - a far cry from when the company was first acquired and he said: "We are going to make a successful company with good integrity and good product, that makes a profit. There is no question about that."

Today, Gold rarely, if ever, meets with the press. After repeated requests by the Business Journal for an interview, company officials said he would be unavailable. They also could not say the last time he had been interviewed concerning the company.

"Gold is just not here today," said William Benford, L.A. Gear president. "He is extremely busy, he has a number of things going on, including L.A. Gear. He is active with other business interests. He is also active with L.A. Gear."

Gold is also president, chief executive and director of Shamrock Holdings Inc., a real estate investment firm. He is a director of the Walt Disney Co., and of Koor Industries Ltd., the largest industrial group in Israel.

According to Benford, Gold is a hands-on manager when it comes to corporate strategy, and hiring top executives, but then delegates operations issues to his management team.

"I talk to Stanley anywhere from several hours a week, to several hours a day," said Benford.

It was 1991 when Gold led the Burbank-based Trefoil Capital Investors L.P., a Disney family-financed investment partnership, to buy a one-third stake in L.A. Gear at about $12 a share, for $100 million.

Back then, Gold was known as a corporate turnaround genius - thanks to several well-publicized deals in retailing and broadcasting. The $450 million Trefoil pot was primed to snap up corporate candidates ready for resurrection.

But even then, many in the industry had been betting against Gold as he tried to make money while going up against Nike Inc. or Reebok Inc.

Those two giants control 57 percent of the athletic shoe market, and have huge marketing budgets. L.A. Gear's market share, even in its flush years, trailed significantly.

From an investment standpoint, L.A. Gear has been a disaster. Its stock price skid came in the midst of an historic bull when even lesser-lights were making money.

According to the company's 1995 annual report for the period ended Nov. 30, an investor who put a dollar into L.A Gear stock in November 1990 would have 14 cents of stock by November 1995.

If the investor had put the $1 into the S&P 500, he would have $2.17 of stock in the same time frame.

Even more striking, if the investor had put a dollar into an index of shoe stocks, he would have $2.76 worth of stock.

Ironically, even as L.A. Gear has proved to be a troublesome investment, Gold has been obliged to get in deeper.

In 1995, exchanges of convertible stock - caused by L.A. Gear's financial inability to pay to Trefoil dividends as contractually specified - boosted the Trefoil-Disney stake to 45 percent of outstanding common.

In the small world of Southern California investment bankers, Gold is still highly regarded, and most praise his investing acumen and judgment.

But Gold's purchase of L.A. Gear is regarded as his career mistake, and an albatross around his neck.

Bankers contacted by the Business Journal insisted on talking off the record. Many like Gold, and may hope to do business with the still-substantial Trefoil warchest.

Said one banker, "Gold's record is a bit tarnished. I don't know what his exit strategy is going to be."

Meanwhile, Benford, a pillar of stability at L.A. Gear since 1991, believes that new styles designed by Bruce MacGregor will prevail in the marketplace, and so will the company's re-dedication to children's and women's athletic fashion shoe market.

The designs of MacGregor, new chief of marketing, design and development and formerly of shoemaker Avia, will hit the shelves in February next year, and in a big way in June, said Benford.

As for a rumored sale of L.A. Gear, Benford would only say this: "We believe this is a consolidating industry, and that consolidations make sense."