Asics’s 13 full-price stores in the U.S. have quietly been closed and Asics America now faces a lawsuit from Windsor Financial Group, which had the exclusive rights to operate retail stores in the U.S.
In June, Asics America terminated its agreement with Windsor because of undisclosed “material breaches” by Windsor, including non payment of its licensing fee.
In the lawsuit filed in a California court in Los Angeles County, Windsor charges that Asics deliberately withheld promised inventory and marketing support from the 13 stores it operated in a move to drive the licensee out of business and subsequently acquire the outlets on the cheap.
A May 2013 agreement gave Windsor the exclusive rights to develop, open and operate Asics-branded retail stores in the U.S., Canada and Puerto Rico for a 20-year period, according to the lawsuit. Windsor claims it spent millions establishing a flagship store in Times Square and branches in New York, New Jersey, Boston, Chicago and Southern California.
The suit notes that Asics America’s former-CEO Kevin Wulff in 2014 attributed a 15 percent increase in annual sales partly to the opening of stores by Windsor, allowing North American revenues to surpass those from Japan for the first time in the company's history. The flagship Times Square outlet, measuring 5,000 square feet, opened with fanfare in October 2014 to support Asics sponsorship of the New York City marathon and broke $1 million in sales in its first 30 days.
But Windsor in the complaint said Asics intentionally limited Windsor's access to products, such as the popular Asics Onitsuka Tiger. It was said it was challenged operationally because Asics failed to live up to promises to develop new merchandise beyond running shoes, leaving Windsor with large 3,000-square-foot stores and not enough products to stock them. Leasing costs were estimated to be double what they might have been had they not counted on additional categories. The suit claims the promised categories included soccer, basketball and baseball lines, tennis wear and golf wear.
Finally, the lawsuit contends Asics neglected to follow through on its promise to launch a broad advertising and marketing campaign to help the brand become more competitive with rivals such as Nike and Skechers.
As a result, Windsor underwent a cash flow crunch and Asics served Windsor a Notice of Breach in February 2015, even after its CEO had assured the licensee of the company's continued support, court papers say.
The suit claims Asics America granted Windsor time to cure its breach and agreed on an inventory reduction program if the licensee secured additional financing. But just days before that $12 million financing was to close in June, Asics terminated Windsor's agreement. Windsor said it no recource but to shutter all 13 doors, including the Times Square flagship last week.
“Asics wrongfully terminated the Master Retail Agreement with malice and intent to destroy Windsor so Asics could capture Windsor's network and assets at a fire sale price,” states the lawsuit.
Asics didn’t respond to the lawsuit. In June while terminating the aggreement, Wulff said, “While it is unfortunate the relationship with this partner did not work out, the experience has taught us a lot about the direction we need to go with respect to retail stores.”
In mid-September, Asics announced that Wulff, who had guided Asics America for the last five years, would retire at the end of this year. Gene McCarthy, who most recently led Merrell, replaced Wulff as CEO on Oct. 1.
