Back in September of 2013, when Centerbridge and Oaktree invested in Billabong, there was some discussion/consternation about the possibility of Oaktree combining Quiksilver, which it already controlled with Billabong. Quiksilver’s name, as you know, was changed to Boardriders. It owns the Quiksilver, Roxy and DC brands. Billabong’s three largest brands are Billabong, RVCA, and Element. It also owns some smaller brands which I continue to expect will be sold. Probably easier to do that once Billabong is not a public company.
In the past, I’ve been more than willing to criticize trade shows, suggest changes, and express our mutual uncertainty as to what the role of trade shows should be and how they should perform that role. Even recognizing that the winter Long Beach Agenda typically has lower attendance than summer, I was surprised at the low attendance and the brands that did not attend. I also heard from more than the usual number of brands that attended only because they got free booth space.
Or a brand for that matter. Please find 13 minutes to watch this Ted Talk on the evolution of retail in China. If you can’t do that, at least read the transcript in six minutes or so.
The trends she discusses are enabled by the fact that 90% of online sales are controlled by two companies in the Chinese market. She tells us what is happening right now in China. This is not about a possible future- it’s about how the Chinese retail market is operating right now.
Everything she highlights you are already seeing in your country, though the scale and rate of expansion is probably less. Is this the future for your market? Are there cultural or structural differences that might restrict it or, more likely, make it different? Sure. Probably. I guess.
Next, you might check out this New York Times article on how Amazon is facilitating the emergence of cheap, high quality consumer devices. It’s focused on electronics, but it’s worth considering how your product might be impacted. Or maybe how it might benefit?
Both offerings tell us how market forces are driving a better deal for the completely in control consumer. Both also give us some insights into how brands and retailers are eviscerating their traditional business practices to satisfy those consumers but still be able to earn a profit.
How, when you increase your sales less than half of one percent (compared to the prior year’s quarter) from $152.1 to $152.8 million, do you manage to increase your net income 36.5% from $6.42 to $8.76 million even though tax expense rose by $1.38 million while operating with five less stores (220 total)?
Zumiez increased revenues and profits in their October 29 quarter compared to the same quarter last year. The more interesting strategic question is how (if a single quarter is indicative of longer terms trends) and I’d like to highlight three factors that I see working together, though they are typically discussed separately.
Well, it appears I’ve done it again. After having published just this morning an article in which I said, “Billabong would be better off as a private company, but I don’t see a path to privatization that makes sense to Oaktree,” Billabong has received an offer to have its outstanding shares acquired for $1.00 each (Australian dollars) from Boardriders (formerly Quiksilver), in which Oaktree has a majority interest. Guess I should have added, “to which Billabong could be expected to agree.” I may still turn out to be right with that caveat. Here’s the announcement.
A few weeks ago, you no doubt saw the reports that Billabong (which would mean Oaktree Capital Management– the controlling investor in Billabong) was doing due diligence on Rip Curl as a possible acquisition. Oaktree, of course, is also a major investor in Quiksilver.
When Oaktree invested in Billabong, there were some rumblings about combining it with Quiksilver, but nothing ever happened.
Meanwhile, we have a bit of information on Rip Curl’s earnings and last week, and Billabong held its annual shareholders meeting where Chairman Ian Pollard and CEO Neil Fiske reviewed the full year results. Those results were released back in the middle of August and I wrote this article about them.
“Okay Diane [my wife], I give up. We’ve been trying to find a smaller house for two years in this stupid Seattle real estate market. It ain’t happening until next spring and I’m buying the cord of wood we need for our fire place to get through the winter (along with some red wine).”
Wood arrives. We get it stacked. Next day (you had to see this coming)- “Jeff, I’ve found our house!”
So she had. The house we’ve now bought went on the market September 28th, we were in escrow on October 12th, closed about ten days later, put our old house on the market (way more fun to be a seller than a buyer in Seattle right now) and moved into the new place November 6th. As the pile of boxes has diminished, I’ve once again turned to what’s going on in the industry.
Two months ago, I got an email from Dave Grant, the owner of Vermin Scooter Shop in Calgary.
“A what kind of shop?!” I thought. Scooter shop. Yep.
Like many of you, I remember all those years ago when scooters first made their appearance. Also like many of you, especially in the skate industry, I expected scooters to be a blip that went away. I recall how they followed the typical and expected trajectory- grew exponentially, got over supplied, crashed. That’s the end of that, many of us thought.
So, I don’t know what’s going to happen this afternoon, much less five years from now. Without comment, I just want to direct your attention to this article/presentation by the BBC. Just go to this link, hit “TAP HERE” and start reading, scrolling and watching. I’m sure some of this is going to happen. I’m sure some of it isn’t. I’m sure some stuff we haven’t even begun to imagine is going to happen.
Not predicting the future here. Just want you to consider the possibilities and consider how it might be used to help your business.
I enjoy hearing from you, even when you disagree. The exchange means that I learn something, too. Leave a comment on any of my posts to contact me directly.
Market Watch updates
- No Store Growth; Perhaps a Good Decision, But What’s the Strategy? The Buckle Annual ReportApril 19, 2018 - 1:40 pm
- A Brief Remembrance of SPY CEO Seth HamotApril 2, 2018 - 10:59 am
- Zumiez’s Annual Results; And Tales from its Conference CallMarch 30, 2018 - 10:44 am
- VF’s Management Process and Strategy: Thoughts on Their Annual ReportMarch 18, 2018 - 12:49 pm