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It’s been a year of recovery, albeit slowly, for much of the outdoor marketplace as it struggles to cope with apparent consumer apathy, an economy that is hard to gauge, and an international climate that still is not overly welcoming to travel.
European sales increases and improved distribution practices continue to drive sales growth for most companies. Retailers who tell us they are doing much better are often doing so simply because of leaner inventories and better bottom-line management leading to improved margins.
What remains consistent from last year’s observations is that the overall size of the market is not growing at any perceptible rate, meaning any growth by one company continues to come at the expense of another. And that continues to drive the movement toward more consolidation.
For 2004, SNEWS would surmise that we will continue to see more of the consolidation pattern as weaker companies without sufficient capital to survive or grow get swallowed up by larger companies seeking portfolio growth through diversification. There are plenty of companies shopping, and we know of quite a few willing to sell — if the price and timing were right. Should make for an interesting year on the acquisition front.
Consumers finally seem to be spending, and thanks to leaner retailer inventories, are buying more product at full price. Still, unless this industry finds products that will capture the consumer’s imagination and retailers willing to take a risk to carry those products, we’re going to see consumers continuing to shop price first, selection second, and specialty retailers left once again struggling to figure out what happened. Those retailers who tell us they are doing well are doing so only because they give their customers a reason to shop them, beyond the price debate.
What follows, then, is the SNEWS look at a few key Outdoor stories that we feel shaped 2003 and could impact our industry in 2004:
OIA in the national spotlight
In May, Black Diamond’s CEO, Peter Metcalf, penned an editorial that appeared in the Salt Lake Tribune as an economic rebuttal to Utah Gov. Mike Leavitt and the Secretary of Interior Gail Norton’s backroom deal to remove Wilderness Study Area protection from some 6 million acres of potential Utah Wilderness. For the first time, the economic value of wilderness and how it affects our industry’s business as well as where we, as an industry, hold our show was being linked. In short order, the Outdoor Industry Association (OIA), Metcalf, as well as other industry leaders such as Roody Rasmussen of Petzl were engaged in a “play for keeps” poker game with Leavitt; at stake was the $24 million in revenue from the industry’s two annual trade shows run by Outdoor Retailer in Utah. Never before had a single issue galvanized such intense national attention on our industry. Suddenly, OIA and the industry were being considered serious economic players that had to be accounted for during any political discussions involving recreation or public lands. By the time the dust settled, Leavitt was gone to head the EPA, but not before he agreed to formally oppose 15 new gas wells proposed for drilling by the BLM and not before he signed an executive order creating the Outdoor Recreation Economic Ecosystem Task Force to help resolve the status of Utah’s unprotected wildlands and promote the states’ recreational economy. Metcalf’s and OIA’s gambit had played out and the industry won this round. It is now virtually assured that the outdoor industry leadership will find an invited place at future negotiations involving public lands policy, and that is a good thing.
SIA settles in
Snowsports Industries America’s (SIA) organizers doubtlessly breathed a collective sigh of relief after the inaugural Mandalay Bay Convention Center show. By most accounts, other than the floor-layout that left retailers wandering around in a dumbfounded daze trying to make an appointment, any appointment, the show was a huge success. Energy was up and the venue was top notch. Nordic companies chose SIA over OR for the first time in a long while, and seemed quite happy with that decision. As we head into ’04, it appears as if the good energy just keeps building, and thanks to decent to great snow in most regions, and a sold out trade show, it appears as if SIA is well positioned to keep expanding on the positive momentum.
Sold to the highest bidder
Benetton sells Nordica back to Tecnica for $40 million. Franco Vaccari laughed all the way to the bank since he and Tecnica sold Nordica to Benetton in 1989 for $120 million.
Mammut acquires Raichle from Kneissl & Friends saving the once venerable brand from obliteration and from losing a foothold in the U.S. market.
Columbia acquires Mountain Hardwear for $36 million. Columbia unabashedly states that they expect MH sales to increase from an estimated $37 million in 2003 to $100 million by 2008. Eyebrows were rising across the nation. MH already has a dominating position in a market that is not growing. So, either it increases its distribution to include stores it doesn’t currently distribute to, or it adds new product lines. Packs will certainly be added to the mix this year, but that’s not going to garner MH huge market share immediately, if ever. Packs are simply too competitive a market. Perhaps luggage? Doubtless there will be an attempt at footwear too, but frankly, The North Face has struggled with that introduction and we’re not sure MH will fare any better. Too many players, too limited a market. $100 million by 2008? Well, let’s get through 2004 and see where we are then.
Royal Robbins gets sold to the Phoenix Footwear Group for $6 million in cash as well as other payout contingencies. Owner Dan Costa, CEO of RR, will remain with the company for three years under contract.
K2 lands a company that will mesh nicely with Dana — WinterQuest, the parent company of Tubbs Snowshoes, Atlas Snowshoe Co. and Little Bear Snowshoes. WinterQuest had sales totaling $18.6 million for the year ending March 21, 2003.
CamelBak gets sold to Bear Stearns for a whopping $210 million in cash. Those close to the deal have indicated to SNEWS that the way the deal was structured, Kransco likely came away with more cash than that. Either way, it was a great day for the CamelBak team which now can mine deep pockets as it continues to innovate and lead the market it currently dominates.
Amer Group, parent company of Atomic, acquired Volant skis from Huffy. No surprise really as Huffy wanted to jettison the company and Atomic had been making the high-end Volant skis for several years. Estimated ’03 sales for Volant were $4.8 million.
Say bye byeâ€¦
After 31 years of doing business in San Jose, Calif., Western Mountaineering shut its doors with owner Lock Miller, president of Marmot Mountain Works, citing the poor local economy, changed retail climates and expensive lease as reasons.
Last Chance Sportswear phases out consumer operations to focus entirely on private label and corporate apparel sales. Owner Terry Hillegas determined, sadly, that his company, though loved by retailers (and by the SNEWS team) was not being supported enough at retail to justify continuing.
Tua skis disappear from the market as the company’s parent, Gestione Sport Alpini, filed for bankruptcy protection in Italy in August.
Despite remaining profitable, Marin Outdoors, a Northern California fixture for 55 years, shut down in the face of insufficient capital and dwindling sales.
Dagger exits the canoe business, and transfers all Dagger warranty business as well as the rights to make the popular Ocoee canoe. Dagger cites declining sales numbers and diminishing return on investment as the reason for bowing out.
The name is the same, butâ€¦
Sierra Designs said good-bye to all but three of its staff, including President Sally McCoy, as the company completed a move from Berkley, Calif., the only home the company had known since its founding in 1965. The good news for the company was that the replacement staff had veteran pedigree. Still, the challenge to turn the ship around and re-energize sales in the tent, sleeping bag and apparel side of the business has not been easy. Our 2003 SNEWS survey revealed SD losing market share in every area in which it had traditionally played well. It remains to be seen if SD’s 2004-2005 products will be able to grab back some of the market share the company has lost.
It shouldn’t be this hardâ€¦
Nine months after former CEO Bill Medlin was unceremoniously dumped on April 29, 2002, American Capital Strategies named self-proclaimed turnaround expert John Bergeron as the new CEO at Confluence. By June, Confluence was once again in the news, this time for failing to ship preseasons while at the same time opening Dicks and selling them Pungo kayaks — albeit an old model, but that didn’t matter to retailers. Kelley Woolsey rode to the rescue with apologies and personal retailer calls and appeared to have the ship righted, just in time for, yes, another Confluence bombshell. More layoffs and pay cuts that were announced in October in the face of missed September numbers (ACS was not happy), a cash-poor environment, and a warehouse bursting at the seams with boats. Woolsey once again paddled furiously to keep the company moving in a positive direction by working closely with retailers and the media. The warehouse is emptying, thanks to new terms ACS is allowing, meaning retailers can take boats now and not have to pay for them until July or August 2004. But wait, it just wouldn’t stop. In late November, it came to light that Bergeron was quoted in two paddlesport trade pubs that Jim Henry, founder of Mad River, was either in discussions to work for or actually already working for Confluence. Neither was true, but this time, ACS decided that it was tired of Confluence talking to the press about anything so it put the clamps on the Confluence team, leaving everyone else in the world BUT Confluence to talk about Confluence silliness — which naturally folks were just lining up to do. It really shouldn’t be this hard, should it? We can only hope 2004 offers smoother waters to paddle for the Confluence team. Woolsey, at the very least, deserves a few easy months.
Of course, Confluence was not quite alone in paddling rough waters of its own making. Johnson Outdoors decided it wanted to join in the fun too, with the company’s newly reorganized Watercraft division managing to lose $9 million on $80 million in sales. Those dismal results dragged the entire company portfolio into the proverbial toilet, with investors none too pleased. While Johnson officials assured investors that this would never happen again, there are whispers that with the loss of a huge military contract in 2003, worth as much as $45 million, Johnson will be scrambling to expand distribution channels to bolster sales, and that could lead to mass discounting and over saturation of the market — like we haven’t been there before.
Reductions & Departures
L.L. Bean eliminates 300 jobs as the company seeks to streamline and become more efficient in response to increasing competition from the likes of REI, Lands’ End, EMS and others, as well as increased costs stemming from payroll increases and rising health care premiums. While the company remains profitable, it’s having trouble encouraging sales growth other than in the mid-range, single-digit percentage increases, and that translates only into single percentage point revenue gains.
K2 laid off 36 employees in a March restructuring move, mostly from the snowboard team, but a few also from the Dana Design team. The result? While Rick Saez weathered that storm, he elected to leave the company in mid-summer. Dana has a very talented designer in Zac, and insiders tell us that Dana is trimming SKUs to make the offering more efficient and easier to understand and sell for retailers.
Watermark lays off 18, including vice president of marketing Dean Hart who found out he was laid off only after returning from a media trip where he was promoting the strengths of the company as well as the new products ahead. Ouch!
RLX decides to abandon its outside sales force and launch a new sales strategy focused on Polo Ralph Lauren full-line stores as well as a select number of loyal, high-end, specialty bike, ski and outdoor retailers. Logical move for a company that was spinning its wheels trying to sell to the broader specialty markets.
Mike Burns, majority owner of Backwoods, gets forced out after 21 years at the company. While the way in which Burns was treated by his partner, Lewis Mull, seemed completely bizarre and smelled worse than a city garbage dump, Backwoods has managed to steady itself under Jennifer Mull’s (Lewis’ daughter) direction. Several reps have contacted us to say they are very impressed with how she’s conducting business and a few SNEWS spies who visit the store have come away with positive vibes.
Rudi Meyer, founder and former owner of Erewhon, reduced to an obvious puppet leader in early 2003 by current investors, is finally forced out.
We said goodbye to an industry legend and friend in March, Ron Gregg, age 54, and the founder and president of Outdoor Research. Gregg was killed in an avalanche during a ski trip in British Columbia. By June, the company had been sold to Dan Nordstrom (yes, of those Nordstroms) who vowed to keep the dream alive and by all accounts, he is doing just that and more.
Royal Gorge’s historic Wilderness Lodge burns to the ground in early November, most likely a victim of arson. While the lodge will be rebuilt, decades of irreplaceable photographs and memorabilia went up in flames.