Fila made more than $61 million last year, or $2.42 per American Depositary Share. Analysts expect this year's earnings to be $4.30 a share and next year's to reach $5.37 a share.
By September, Fila's stock was riding a wave of optimism so intense that its American Depositary Shares traded at more than 31 times Fila's recent earnings (the Standard & Poor's 500-stock index is now at about 20 times earnings). Merrill Lynch analyst Brenda Gall defended the price in May, saying using past earnings to value Fila stock was unfair because 1997 earnings figured to be so much stronger than 1995 or even 1996.
But over at Salomon, former Reebok executive Barakett wasn't buying it.
Other analysts thought Fila would keep growing 20 percent to 30 percent a year. They thought Nike would grow 20 percent plus. But industry sales are growing only 7 percent to 10 percent.
"Someone has got to give," Barakett said. So when Salomon started formally covering Fila Dec. 3, Barakett rated the stock as "neutral" -- a kissing-your-sister rating on Wall Street.
"I wasn't bearish. I put a hold on the stock, not a sell on the stock," protests Barakett, whose report predicts that Fila shares will rise to $80 to $83 in a year. But all of a sudden, skeptics about Fila weren't completely alone.
Over at Gruntal & Co., analyst Susan Silverstein had moved on and been replaced by Michael Conn, who cut to $80 Silverstein's estimate that Fila shares would reach $115 in 18 months. He wouldn't talk about it, saying "it is a sensitive situation."
Both Conn and Barakett wrote that Wall Street's expectations for Fila's sales growth are too high. Barakett thinks that sales growth could fall to 10 percent early next year, despite Fila's November announcement that futures orders for the first half of 1997 are up 41 percent from the same time last year.
"One particular concern, in our view, is signs of continued sluggish [retail sales] for the company's marquis [sic] footwear product, The Grant Hill," Conn wrote. He blamed a slow market for basketball shoes and better competition from Reebok and Converse, both of which have struggled recently.
"The Grant Hill came out and didn't sell anywhere near expectations," Liewald admits. But he says all basketball shoes are moving slowly, and that doesn't mean Fila is losing its touch.
Sporting Goods Intelligence's Horan agrees: "Outside of the Air Jordan, nothing is doing much. The Penny [a heavily promoted Nike shoe named for Orlando Magic guard Anfernee "Penny" Hardaway] went out at $140 and went to $99 in a week."
But Barakett is worried about more than just the Hill shoe. Longer-term, he says, the push into sneakers by fashion houses like Donna Karan, Ralph Lauren (which is in a joint venture with Reebok), Nautica and Tommy Hilfiger will claim up to 7 percent of the $8 billion U.S. wholesale sneaker market, an estimate that he bases largely on conversations with retailers.
That share will have to come from somewhere, and he figures the strongest candidate to get hurt is Fila. More than Nike and Reebok, Fila relies on fashionable design -- the newcomers' strength -- to sell its shoes, Barakett said. Fila doesn't have the Air technology that makes people ask for Nikes, or the Feet You Wear concept that is boosting Adidas.
The only Fila shoe Barakett sees selling season after season is the Hill. Other than that, he reasons, Fila has to keep the brand hot by coming up with fresh styles every season. That's easier said than done, especially once big fashion houses get into the game.
"These are serious players" with more money, better reputations and more clout with retailers than eclipsed fashion-sneaker rivals like L. A. Gear, he said.
Fila executives seem puzzled by Barakett's analysis. They say he assumes that Fila will get beaten up by brands that aren't direct competitors -- either because they're likely to be far more expensive or because they don't have any athletic style or function.
Donna Karan sells to women, a market where Fila is already weak, although it has been improving. Prices for Lauren's shoes haven't been announced because they won't come out until 1998, but the brand is at the expensive end of every market it's in -- a marked contrast to Fila, whose most expensive sneaker is $40 cheaper than the top of Nike's line.
"The only one that could make a significant impact is Tommy," said Liewald, a former top executive at FootLocker.
Nonetheless, once the stock started falling little problems began to seem more important. In particular, a scandal that broke in in October involving ex-financial executives of the Italian conglomerate Gemina S.p.A., which owns about half of Fila, forced executives to deny speculation that Fila would revise past earnings reports showing spectacular growth.