K-Swiss Earnings: Will Kenny Powers Ads Lead to Profit?

At one time K-Swiss was known as a conservative white tennis shoemaker, but that all changed when it hired fictional athlete Kenny Powers as its spokesman.

Kenny Powers, played by actor Danny McBride, is the main character of HBO's "Eastbound and Down" and known for his boozing, steroid usage, and love of profanity.

The company's most recent advertisement featuring Powers as the company's CEO, immediately went viral and was bandied about by media across the country.

Can that translate to profits for the California-based company?

It certainly hopes so.

K-Swiss has invested a lot of money marketing its Tubes shoes with Powers; so much so that the company has admitted its marketing spending will cut into profitability. It told CNBC's Darren Rovell that it will cut back on its marketing efforts in 2012, though the company will still spend while in "investment mode."

It has already seen returns since the beginning of the marketing campaign, but more in the cultural than economic realm. K-Swiss has seen its Facebook page receive significant more followers, over a million YouTube views for its latest commercial, as well as a feature in industry trade magazine Footwear News.

On the most basic level the commercials have created a renewed buzz around the K-Swiss shoes. But unless the company starts to sell more shoes, the increased buzz and media attention won't be worth much.

What to Expect Short-term

In its first quarter earnings report, K-Swiss announced that its Tubes shoes outsold its traditional tennis shoes for the first time in its history. The company is certainly hoping that momentum continues with the new marketing campaign.

It is certainly hoping to follow in shoe and apparel giant Nike's footsteps, as Nike recently posted better than expected earnings per share and profit numbers. The company posted 28 cent earnings per share loss in the first quarter though some analysts expect to see the company improve upon that number.

With footwear sales appearing to be on the rise, look for K-Swiss to at least better that 28 cent EPS loss in the first quarter, though the company is not expected to post an EPS profit this quarter.

What to Expect Long-term

The success or failure of the Kenny Power marketing campaign won't make or break K-Swiss. If the company is capable of producing more and more innovative campaigns it could help make K-Swiss a major cultural force, but ultimately the quality of the product will play an impact.

K-Swiss will need more than one successful marketing campaign to try to keep up with major powers like Nike, Adidas, and Reebok. If you'll remember, it took more than one major campaign for Phil Knight's Nike to take over the shoe and apparel world.

Right now the stock seems to be underpriced at a little over $10 though. If it can continue to show some progress in the next two quarters, this company could be worth double what it is right now.