Kathmandu Buys Rip Curl: Analysis and Questions

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I admit it.  Before this deal, I’d never head of Kathmandu, a public company headquartered in New Zealand.  If you haven’t either, you can visit their consumer facing web site or their investors web site where you can pour over all the deal related documents I’ve looked at.  Mostly, though, I think you’re happy to leave that chore to me.

Kathmandu “…is a designer, marketer, retailer and wholesaler of clothing, footwear and equipment for travel and adventure. It operates in New Zealand, Australia, United Kingdom and United States of America,” as described in their public filing for the fiscal year ended July 31, 2019.  Below are some summary numbers for its last two full years.

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An Inevitable Deal: SPY Purchased by Bolle

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I never learned why SPY went public in the first place all those years ago.  I imagine it was because a group of people who may not quite have understood the industry saw potential fast growth and a chance to make a lot of money.  Those were different times.  I have some experience with that way of thinking from the snowboard industry.

The benefit to me, and to you, was in being able to follow a smaller niche player with a solid brand and see how they could compete among the big players in an industry where meaningful product differentiation wasn’t easy to come by.

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An Agnostic Moat; Zumiez’s Most Recent Quarterly Results

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Zumiez had a great quarter ended August 3 (remember I don’t write until I have received and digested the 10-Q).  They did it with sales that rose just 4.3% from $219.0 in last year’s quarter to $228.4 million in this year’s.  But they also increased their gross margin from 33.1% in the same quarter last year to 33.8% in this year’s quarter.  And their selling, general and administrative expenses as a percent of revenue declined from 30% to 28.7%.

The bottom line was a net income that more than doubled from $4.38 to $9.03 million.  They’ve got an imminently solid balance sheet.  Combined with improved margins and reduced expenses over a modest revenue increase and you end up with a great bottom line.

More on that later.  You’re probably wondering what I mean by an agnostic moat.  If not, I wasted a lot of time coming up with that title.

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Globe Sells Dwindle and Files Its Annual Report

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Globe filed its annual report for the year ended June 30, 2019 pretty much concurrently with the announcement that it had sold Dwindle to Highline Industries Corporation.  Skatewire reported that the purchase price was $1.5 million, but what the annual report says is that the carrying value of the assets was $1.5 million.  I haven’t seen the purchase reported anywhere.  The transaction will close and be accounted for in the first half of Globe’s current fiscal year.  If you haven’t, you might also read the interview with Bod Boyle and Steve Lake on Shop Eat Surf about the deal.

According to Globe’s annual report, “The transaction includes the brands, working capital, domain names, social media accounts and the personnel attached to the Dwindle business.”  Maybe they shouldn’t have worded it so it sounds like they sold the employees.

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Consolidation and Finding New Participants; Vail Buys Peak Resorts

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It was July 22nd when Vail announced it had reached an agreement to purchase Peak Resorts for $11.00 a share or a total of $264 million.  Peak Resorts, traded publicly under the symbol SKIS, closed at $5.19 on July 19.  Hard to say “no” when somebody offers you more than double your stock price.  Vail will also assume or refinance Peak’s debt, which totaled around $230 million on April 30.

Vail operates 20 mountain resorts in the west (I guess Australia is “west.”).  Peak has 17 ski areas in the northeastern U.S.  Vail also has 240 retail locations.

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Hibbett Sports Says Some Interesting Things: Can They Catch Up in Ecommerce?

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In its conference call and 10Q filing for its May 4th quarter, Hibbett said some interesting things about what it’s doing.  Let’s take a brief look at Hibbett and its numbers then talk about how Hibbett is trying to adjust to the changing retail world after its very late start.

Hibbett describes itself as “…a leading athletic-inspired fashion retailer primarily located in small and mid-sized communities across the country.”  As of May 4, it had 1,144 stores in 35 states, “…composed of 985 Hibbett Sports stores, 141 City Gear stores and 18 Sports Additions athletic shoe stores.”

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Is There Value in Reporting Comparable Store Sales? Zumiez’s Quarterly Results

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A couple of years ago Zumiez stopped reporting comparable store sales changes and started reporting just comparable sales changes.  That is, they no longer told us how their brick and mortar stores were doing in isolation from ecommerce.

They were one of the leaders in making this change.  Now, it’s how most retailers report.  Their argument was that they needed to think of their market as one sales channel- the proverbial omnichannel.  It didn’t matter where the sale “happened” and they couldn’t always tell where it “happened” anyway.  If a customer first saw a product they purchased on their phone in the store, where’s the credit for the sale?

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How VF Keeps Doing It: Size, Flexibility, Diversification, Disciplined Management Processes, Balance Sheet

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VF’s secret sauce isn’t secret.  It’s just hard to do.  Executing the strategy takes leadership, a quality team, organizational consensus, and a certain level of confidence and perhaps willingness to fail to take advantage of uncertain times.

You’ve probably realized that every company needs those things.  So let’s take a deep dive into how VF does what it does with less emphasis than usual on the nuts and bolts of the financials.  The results for the year were strong and some numbers will show up in this discourse.  Here’s a link to VF’s 10-K.  Not suggesting you get down into the footnotes but reviewing the first maybe 10 pages on their business and strategies might be useful.

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Emerald Exposition’s Results, SIA and the Trade Show Environment

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Emerald and SIA are kind of, for now anyway, joined at the hip due to their ownership/continued involvement in the Snow Show.  They are both trying to respond to profound changes in the active outdoor market that are changing their business models.  I thought I might kill the proverbial two birds with one stone and see how they’re both doing and speculate on where that interrelationship might go.

Emerald went public on April 28, 2017 at $17.00 a share.  It reached a high of $24.45 on November 29, 2017 and since then has fallen to $12.34 as of 10:17 AM Pacific Time on May 24, 2019.  That’s a decline of 27.4 percent from it’s offering price and 49.5% from its high.

Emerald currently operates “…more than 55 trade shows as well as numerous other face-to-face events.”

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Hibbett Sports: Annual Results and Omni-Channel Progress After a Remarkably Late Start.

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“At the end of the second quarter of Fiscal 2018, we successfully launched our e-commerce website,” Hibbett Sports (HS) tells us in their 10-K for the year ended February 2nd.  This isn’t news.  I wrote about it last October when I discussed their quarterly results.

If you’re not already familiar with HS, you might review that article before continuing.  My goal is to bring you up to date based on their full year results and new information in the 10-K.  Let’s start with this chart.  It shows HS’s annual results for the last five year.

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