Less shoe doesn’t exactly equal more health benefits, despite what Italy-based shoe sole provider Vibram has claimed to the contrary since its 2005 release of the Vibram FiveFingers, one of the company’s most polarizing styles to date.

The thin-soled, skintight shoes resemble gloves for the feet, complete with five individual toe pockets. Vibram touted that the revolutionary design promotes better foot health through more natural foot movement – one that encourages leg strength, improved sensory reception, and a greater range of motion by “encouraging a forefoot strike and a more natural running form.”

Sounds almost too good to be true, right? Well, for a large contingent of the shoe’s buyers, it is. According to a story broken by Runners World on May 6, Vibram agreed to settle a class action lawsuit for $3.5 million to avoid further court fees and assuage consumer outrage.

Because Vibram is a privately owned company, stock sentiment hasn’t played a direct role in the company’s financial standing. However, that doesn’t mean the lawsuit hasn’t spelled trouble for other investors.

Vibram is credited with creating the world’s first rubber shoe sole in the 1930s. Since then it has partnered with more than 1,000 shoe affiliates and companies, including Rocky Brands Inc. (Nasdaq: RCKY), meaning there are plenty of publicly traded companies that could potentially be affected by the lawsuit.

So what does the settlement mean for the industry, for better or worse? Kick off your toe shoes momentarily for our industry analysis.

Going Bare Is Looking Bleak

The 2005 debut and success of FiveFingers spawned a new “minimalist” shoe genre that rapidly became a big part of the footwear industry. In 2011, such shoes skyrocketed to account for 9% of the overall market (more than $24 million in sales).

Initially, Vibram’s minimalist momentum attracted competition, as well as some flattering minutes of fame from celebrity wearers such as actor Channing Tatum and political commentator Keith Olbermann.

“They’re great for your knees. They’re great for your hips. They make you actually feel younger,” Olbermann said back in 2011 on The Late Show With David Letterman. “Unfortunately, if you try to run in them and you weigh more than 175 pounds, you will break something.”

But alas – like the toe pockets at the end of each shoe, the minimalist movement’s days were numbered.

In 2014, public skepticism of the shoe’s performance went mainstream. After a good run that lasted almost a decade, a solid product niche gradually eroded into a rapidly declining fad – of which Vibram’s lawsuit is both a cause and a symptom.

Industry numbers show consumers only recently gained cold feet. According to Runner’s World, minimalist shoe sales have been on the decline as early as the first quarter of 2013, in which sales dropped by a surprising 10%. Now the category is falling further behind the pack, with sales taking a nosedive by 47% in 2014, according to The Wall Street Journal.

Although FiveFingers remains one of the top barefoot shoe choices, the settlement has the potential to push other minimalist shoemakers to rearrange the deck chairs on the proverbial sinking ship. The ruling essentially discounted the category’s main selling point – healthier running – which could spell doom for Vibram spinoffs, such as the Skele-Toes from Fila Korea Ltd. (KS: 081660) and the split-toed, gym-dwelling AdiPure Trainer 1.1 from Adidas AG (OTC: ADDDF).

Less mainstream offerings from New Balance, Merrell and ZEMgear may scarcely stand a chance.

Traditional Running Shoes Are Trending

While minimalist shoe sales continue to deflate, the overall running shoe industry has grown to $7 billion. It seems the thinner the shoes are, the more likely they are to bear the brunt of the decline, as consumers increasingly embrace next-gen traditional running shoes, according to industry analysis firm SportsOneSource.

Since minimalist shoes debuted, traditional running shoes have evolved to be cut lower and more lightweight. One example of this cross-category appeal comes from the Nike Free minimalist shoe by Nike (NYSE: NKE), which has rallied sales by packing a naked running experience into a more traditional-looking shoe.

Taking the Next Step

Vibram’s litigation has likely sounded the death knell for the minimalist shoe craze. Expect consumers weary of ankle and foot pain to look toward more substantial shoes for comfort.

Some may even go as far as to embrace the “maximalist” counter-craze, which champions borderline obese running shoes stuffed with padding – i.e. the Hoka One One shoes from Deckers Outdoor (NYSE: DECK). Since the fat-soled shoe’s introduction, the company has expanded by 400%, Outside magazine raves.

But Vibram isn’t backing down – just picking its battles. The company maintains no wrongdoing, but agreed to cease touting the alleged health benefits – unless, of course, they can prove so through experimentation.

Until then, we’ll cross our toes and let the great foot debate continue.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of Wall Street analysts.

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