Outdoor 2002: SNEWS reviews the year and peeks ahead

It’s been a tough year for the collective outdoor marketplace as it struggles to emerge from the challenges of a post 9-11 economy that shows few glimmers of hope. While a few companies grew in size — some certainly realizing growth because of European sales increases and improved distribution practices — other companies remained flat or helplessly watched sales slide. What has become clear is the overall size of the market is not growing at any perceptible rate, meaning any growth by one company is likely coming at the expense of another. And that has led to consolidations, with more likely in the months and year to come.

Bankruptcy protection is also becoming a word to live by, especially for the ailing U.S. fabric industry. Malden Mills, which filed for protection in late 2001, looks as though it will emerge with strength in early 2003. Other fabric companies are not so lucky, with Frisby (makers of ComforTemp) looking dangerously close to filing bankruptcy or shutting down at the first of the year.

Some companies just shut their doors entirely. Hard Corps Sports, a wintersport apparel manufacturer for 16 years, closed down in March. Outdoor Retailer magazine, which had been published since the early ’80s ceased printing, with August as the last issue.

Bankruptcies and closings aside, mergers, acquisitions and consolidations remained the biggest stories this year. January opened up with Arc’Teryx being sold to adidas-Salomon, giving Arc’Teryx deep pockets and providing Salomon with invaluable design talent. In August, Marmot acquired Marker Ltd., the U.S.-based skiwear company based in Salt Lake City, and with that, the worldwide license to distribute Marker-branded apparel. Johnson Outdoors sold Jack Wolfskin to Bain Capital in September. Amid some finger pointing to assign blame, the result of that deal is that Wolfskin is no longer available for sale in the United States or Canada. And finally, Lowe Alpine was sold to Asolo SpA in November in a move that can only mean good things for both companies.

And what bodes for 2003? If we go to war, all bets are off, certainly, but SNEWS would surmise that we will continue to see more of the consolidation pattern as weaker companies with good brand equity get swallowed up by larger companies seeking more diversity or more fuel for investor-mandated growth fires. Consumers have money to spend it appears, but they’re not spending it. We agree with economic experts who think consumers will open up their pocket books if this industry can give them a reason to through innovation that actually means something and through differentiation. Right now, consumers can’t really tell one product from another, one store from another. The sameness is baffling and stifling. To that end then, we expect to see Darwinian Economics at its most aggressive — evolve or die. Retailers who think out of the box and look beyond what they see in the mirror every morning in order to find new customers and give old customers reasons to come back often will survive. Those who don’t won’t.

What follows, then, is the SNEWS look at Outdoor stories that shaped 2002 and will impact our industry in 2003:

Trade Show Dancing

The Outdoor Retailer Winter Market held a very early January show that wasn’t, simply because neither the industry nor the show organizers could get their acts together long enough to provide a consistent message that said, “This show is worth attending.” The Anaheim experience left many exhibitors wondering why they spent so much for so little.

SIA at the end of January wasn’t much better. Most outdoor companies sampling the fare in the hopes retailers who did not go to OR would show up at SIA weren’t impressed and, as a result, won’t be back. The one bright spot was for the Nordic crowd which feasted and, as a result, given the forced choice between having to attend either SIA or OR this year, decided it would be SIA, not OR for now. After fits and starts worthy of a script for a Keystone Cops flick, SIA’s board managed to organize its thoughts long enough to decide that it would remain in its January time slot, and it appears as if the January 2003 show will go off smoothly in a new location — Mandalay Bay Convention Center, Las Vegas.

SNEWS View: For the first time in its existence, OR was eating a large serving of humble pie, and that was good for everyone. OR realized the industry does not need it; the industry simply wants OR to be the best trade show provider possible, and if it is not, the industry will look elsewhere. Of course, where else remains the $20 million question so we’re glad to see OR returned to its highly efficient and skilled ways for the summer OR show in Salt Lake and, by all accounts thus far, is well on its way to putting on a successful Winter Show for 2003. Nordic companies going only to SIA means no Nordic companies, other than a paltry representation of the telemark group, will show at OR’s On-Snow Demo for 2003 (we know, so what, exactly, is being demoed?). We trust that SIA has now learned the outdoor community will not flock to its trade show and abandon OR, and that’s OK. OR should focus on being a trade show for outdoor folks selling outdoor products in the winter season, and SIA should be the trade show for folks selling ski and snowboards goods for the snowsports market. Of course, that said, it would be really grand if both shows could find a way to co-locate, at least in the same city, so retailers could attend both venues at the same time, if they chose to. Finally, regional rep shows continue to gain steam with EORA at the head of the pack. As retailers tighten their traveling budgets, it does appear that 2003 will continue to trend that Winter and Summer Market OR will look more and more like a western show for small specialty retailers, and EORA will embrace the east’s needs.

Say bye bye…

Hard Corps closed its doors on March 10 because, Skip Rapp told us, “it did not make economic sense to me to continue operating.”

Nordic Equipment, a Salt Lake City-based retailer and well-known mail-order supplier of Nordic gear went belly up in May.

Outdoor Retailer magazine shut down publication in August in a move that surprised many.

Kneissl/Raichle say they’re abandoning the North American market in July, but then show up at Outdoor Retailer in August to say, well, maybe not. That said, we still have not seen any evidence of their return. Perhaps soon?

Adventure 16, feeling pressure from insurance companies to lose the outings program or lose its insurance altogether, shuts down its venerable outings program. Many tears are shed, though it is likely the program will resurrect, though not under A16 corporate ownership.

Restructuring

Jagged Edge files for Chapter 11 bankruptcy protection in June to refocus resources on its three retail stores and wholesale business. By the end of 2002, only the Telluride store remains open pending a sale slated to close Jan. 3, 2003, to a woman who was an investor in the Jagged Edge Corp. SNEWS View: Jagged Edge is likely to rise from the ashes like a Phoenix yet again — see our story posted Jan. 6, 2003, in SNEWS.

Retail Concepts, parent to the 24-store chain Sun & Ski sports, dances on the fringes of Chapter 11, sending letters, forming an unofficial creditors committee, and working to renegotiate leases in June. On Sept. 26, it faced the inevitable and filed for Chapter 11 bankruptcy protection. This is the second such filing for the company, with the last bankruptcy filed in 1990.

Malden files to emerge from Chapter 11 with an Aug. 19 document detailing plans for reorganization.

At the end of the year, Frisby/ComforTemp was still without financing and creditors had issued demand letters. It is likely Frisby will be one of the first Chapter 11 filings for 2003.

Acquisitions

Arc’Teryx being acquired by Salomon kicked off the New Year with a bang.

Duane Raleigh leaves as the publisher of Climbing and Quent Williams departs as the production manager of Climbing to start their own company, Big Stone Publishing, which immediately acquires Rock & Ice magazine and Trail Runner magazine. Lawsuits flew back and forth in short order but were settled by the end of the year.

Longtime employee Darren Bush and rep extraordinaire Jeff Weidman purchase Rutabaga from Gordy Sussman.

Marmot acquires U.S.-based skiwear company Marker Ltd. and the worldwide license for anything made of fabric and sold under the Marker name.

Bain Capital acquires Jack Wolfskin from Johnson Outdoors on Aug. 28. Johnson immediately moves to inform retailers it is shutting down North American operations. Amid finger-pointing, it now appears that Johnson was simply abiding by the terms of the sale agreement, and that it is Bain which is to blame (if blame is the right word) for the axing of Wolfskin from the North American market. One thing is for certain, retailers weren’t happy, Manfred Hell, Wolfskin CEO, isn’t talking, and Wolfskin is gone from these shores.

Deckers acquires all of Teva’s patents and trademarks from Mark Thatcher for approximately $62 million. One alert SNEWS reader emailed us wondering if Thatcher was single. Ahh, humanity.

Asolo SpA acquires Lowe Alpine Holdings from William Baird for $21.33 million. It’s a good day for Lowe and Asolo. As for Baird, it took a financial bath, selling Lowe for about $13 million less than it bought the company for in 1999.

WPC Brands, which first denies rumors of a sale when we reported on the rumors in November, finally confirmed it had been sold to United Industries on Dec. 6.

New Beginnings

MontBell returned to U.S. shores in a limited manner through REI store distribution with a full roll-out to specialty retailers slated for spring ’03. MontBell also opened its first retail location in Boulder, Colo., in November. SNEWS View: If retailer feedback from unsolicited email is any indication, MontBell is going to enjoy a very successful niche return to this country after two previous attempts ended poorly. Retailers are practically cooing over the quality and look of MontBell product to us…and well they should. MontBell is fitting the bill of offering something that a consumer can differentiate from other products, and that spells success for retailers seeking to do the same thing.

It’s the Internet, Stupid!

As good as the Internet has been for many businesses, the reality is that current business models abroad as well as the value of foreign currency creates a market situation that U.S.-based retailers cannot stomach — retailers lose hundreds of thousands of dollars in sales to international retailers who are able to sell the same product for less, including shipping. SNEWS investigated the topic fully in April, with a piece titled Internet’s Global Economy Impacting U.S. Specialty Market, and offered solutions. In short order, Climbing magazine (then under Duane Raleigh’s leadership) began bowing to retailer pressures and agreed to temporarily suspend advertising by foreign web-based retailers. Some European manufacturers, including Asolo and Petzl, have taken a very proactive approach to solving the challenges. Others continue to turn a blind eye. Retailers continue to suffer. SNEWS will continue to cover this until it is solved.

Reductions & Departures

Confluence lays off 69 folks in April and, in part because of the media coverage quoting him in ways the majority owner (American Capital Strategies) did not take kindly to, CEO Bill Medlin became casualty number 70.

VF Outdoor Coalition (The North Face, Eastpak and JanSport) consolidates in May and gives employees a one-year notice to give staff time to prepare to move, and in some cases, find a new job. Up to 50 North Face staff based in San Leandro were affected by the announcement.

WaterMark and Duncan Robins part ways in a less than amicable departure for Robins that was handled less than artfully by WaterMark. The end result, though, is that Jim Clark was named the new head of the company and that the company itself was reorganized with one head, and that’s a good thing for all. Clark is a class act and good for WaterMark. As for Robins, you’ll see him in the industry again, mark our words.

Hugh Walton is fired from Hind (his replacement was already in Boulder when Walton was hearing the news from Saucony execs in Massachusetts) on July 29. By the end of the year, Hind has announced the company is relocating to Peabody, Mass., and Walton has a new job by September at the head of Axcent Sports, formed by Walton to license and distribute Descente Athletic apparel in the United States.

K2 accepts Richard Rodstein’s resignation, and names Richard Heckman as the new CEO. Heckman has made no secret of the fact that he wants to create a giant at K2 by acquiring as many small companies as possible and he began in short order by buying Rawlings for $84 million. Heckman was quoted in an LA Time article as stating, “We’re going to lead the consolidation in the sporting goods industry.”

One of the good guys leaves as Peter Benjamin resigns as COO and president of Deckers. Benjamin will be focusing on running his own company, Pacific Resources.

Legal Skirmishing

PanIP LLC filed suit against 11 retailers in May, alleging that each was in violation of patents owned by Lawrence Lockwood that govern how commercial and financial transactions are conducted on the Web — in short, if you have a website that processes data be it sharing records or processing financial transactions, Lockwood claims you owe him money — $5,000 to be exact. All 11 have settled and now PanIP has filed suit against 50 more, with no end in site. SNEWS View: Does he have a legal right to sue and the patents to back him up? Yes. Do most experts think his patents are valid? No. Will it take hundreds of thousands of dollars to attempt to invalidate his patents? Yes. Are most retailers more likely to pay PanIP $5,000 than fight? Yes. Does PanIP’s legal team know this? You be the judge.

On Sept. 30, Deckers gets told by a judge that it really messed up and will have to pay Molly Strong-Butts $4.29 million in damages for violating a non-disclosure agreement and obtaining trade secrets.