Quiksilver’s Quarter and Strategy Update

Quiksilver reported a net loss of $32.4 million in the quarter ended April 30 compared to a loss of $5 million in the same quarter last year. They also released information on their efforts to reduce costs and refocus the business. 

To start, here’s a link to the press release in the 8K with the financial statementsHere’s the 10Q which, to my surprise, came out the day after the earnings were released. Next, here’s where you can see the company overview they released. Among other things, it discussed their profit improvement plan. Just click on the link to open it as a PDF. Finally, here’s where you can read the conference call. I’ll be quoting from that document quite a bit.
 
Let’s Review
 
If you’re a regular reader, you know I’ve been harping on the following themes (which you may or may not agree with) for a while:
 
1)  Focusing on gross margin dollars and operating income is important because sales increases are hard to come by.
2)  Operating well is the price of getting a chance to compete.
3)  Being a public company in our space is damned difficult because of the revenue growth expectations. 
4)  The actual action sports market is a small market.
5)  Having a strong brand requires some discipline in distribution because your brand is all you have and product differentiation is hard to come by.
6)  The further you get from action sports and the more dependent on fashion/youth culture the tougher is your competition. The target customers may know your brand, but they don’t know your story.
 
Now, I’d like to remind you of a couple of things I wrote about Quiksilver in the past:
 
 In March of 2011, I wrote “Quik bought a great brand in DC and has managed its growth impressively. I just hope, with the Roxy and Quiksilver brands not growing as well right now, that they don’t expect more from DC than it can deliver. Their goal is to double DC’s revenues in five years.”
 
In April of 2010 I said, “The source of their future revenue growth…is not clear to me. I’ve said that a couple of times before in comments on their filings and it’s still true. Like all of us, they are dependent on and hoping for a recovery in consumer spending. They’ll get- are getting- some. Like all of us, it won’t be as much as we’d like or have gotten used to. But what they really need are some new places to sell their products. At least in the U.S., I don’t know where else they can go with their distribution. Maybe there are some opportunities in the rest of the world.”
 
Next, let’s summarize the numbers then get on to the strategy.
 
Results for the Quarter- Income Statement
 
Reported revenues fell 6.8% to $458 million from $492 million in the same quarter the prior year. They were down 5% in constant currency. Below is a chart from Quik showing the results by operating segments as reported. EMEA is Europe and APAC Asia/Pacific.
 
 
As reported, revenues in the Americas were up 3%. That was due, we’re told to strong sales of Roxy, but also to “…increased clearance sales of DC product in the wholesale channel…” Opps.     
 
They were down 16% in EMEA. It was mostly in the wholesale channel and all three brands declined. Part of the problem was poor weather and lousy economies. Net revenues in Spain “…declined in the high twenties on a percentage basis.” It was a high single digit decline in France and low double digits in Germany. But the biggest chunk ($16 million) was due to a system conversion that was supposed to stop shipping for a week but ended up stopping it for two weeks and “…resulted in cancelled orders from wholesale accounts.”  They lost some business and had to offer additional discounts to get some of it back.
 
The revenue decline was 14% in APAC. The Roxy and Quiksilver brands were down and both wholesale and retail declined. DC continued to grow in this segment, as did ecommerce. “Net revenues from Australia, New Zealand and Japan declined in the low-twenties on a percentage basis versus the prior year, although the decline in Japan was only high single digits in constant currency. These declines were partially offset by net revenue growth in all other APAC countries.”
 
The numbers look slightly better in constant currency, being up 4% in the Americas, down 14% in EMEA, and down 9% in APAC.
 
By brand as reported, Quiksilver fell 12% to $182 million, Roxy by 6% to $129 million, and DC by 1% to $129 million. Wholesale decreased 9% to $344 million. Retail was down 7% to $91 million. Same store company owned retail sales were down 4% on a global basis. Quik finished the quarter with 564 owned retail stores compared with 549 in last year’s quarter. There are 296 licensed retail stores worldwide. Ecommerce revenue grew 31% to $23 million, representing 5% of total revenue for the quarter. More than 60% of revenue came from outside the U.S.
 
Gross margin percentage declined from 49.2% to 46%. As you see above, it fell in dollars in all three segments. In the Americas, it fell from 44.2% to 40.5%. In EMEA, it was from 55.7% to 53.2%. It rose in APAC from 48.6% to 49.5%. There were, they tell us, four reasons for the overall decline.
 
 “a) increased discounting and clearance sales of our DC brand within our wholesale channel to clear slow-selling product, primarily in the Americas segment.” They expect that to continue in the second half of 2013.
 
“b) increased discounting in our EMEA segment across all three core brands associated with shipping delays encountered with our implementation of SAP; c) $3 million of additional inventory reserves recorded related to certain non-core brands and peripheral product categories that were discontinued.” They characterize that as a one-time issue.
 
“d) a net revenue mix shift from the higher gross margin EMEA segment toward the lower gross margin Americas segment. These unfavorable factors were partially offset by improved gross margin in the APAC segment, particularly within the retail channel and the Roxy and Quiksilver brands.”
 
Selling, general and administrative expenses SG&A) declined from $224 to $218 million but rose as a percentage of revenues from 45.5% to 47.6%. As you can see in the chart, they fell in all three operating segments, but rose in Corporate. They had noncash asset impairment charges of $5.3 million compared to $0.4 million in last year’s quarter.  These charges “…were related to certain underperforming retail stores and certain other assets associated with non-core denominated assets of our European subsidiaries and, to a lesser extent, certain foreign currency exchange contracts.”
 
Quik reported an operating loss of $12.4 million compared to an operating profit of $17.7 million the prior year. It fell from $8.9 million to $2.4 million in the Americas segment, or by 73%. In EMEA, it was also down 73% from $25.8 million to $7 million. APAC went from an operating loss of $4 million to a loss of $6.1 million, a change of 52%.  
 
Interest expense at $15.3 million was essentially the same as last year’s quarter. They had a foreign exchange gain of $2.6 million- $2 million higher than in the quarter last year. At $7.1 million, their provision for income taxes was more or less the same as last year in spite of having a pretax loss in the quarter.    
 
The Balance Sheet
 
Neither current assets nor current liabilities changed much in total over the year. Cash fell from $79 million to $48 million. Trade receivables rose from $371 million to $375 million. The allowance for bad debt on those receivables rose from $42 million last year to $57 million. Days sales outstanding (how long it takes to collect) rose by 10% “…driven by the timing of customer payments, longer credit terms granted to certain wholesale customers and the net revenue decrease during the first half of fiscal 2013.” I guess that given the sales decline, that might not have been what I hoped to see.
 
Ditto for inventories, which rose the slightest bit from $359 million to $366 million since a year ago. Inventory from prior seasons was 10% of total inventory compared to 14% a year ago.
 
On the liability side, I’d note that lines of credits and long-term debt rose from $769 million to $814 million over the year. Total liabilities to equity rose from 1.87 to 2.08 as equity fell from $591 million to $546 million. Net cash used in operating activities during the first six months of their fiscal year was $18 million- the same as the six months in the previous year.
 
What’s the Plan?
 
Like most companies in most industries these days, when revenue increases are harder to come by, managers are looking to operate more efficiently and cut expenses. Quiksilver is no exception.
 
CEO Andrew Mooney starts by reminding us of their three core strategies: strengthening brands, expanding sales, and driving operational efficiency. There’s nobody at any company that isn’t in favor of all those things, but Mr. Mooney increased my confidence level dramatically when he noted in the conference call that “…the plan is quite detailed with tactics and areas of responsibility clearly defined. It includes 71 specific initiatives. These initiatives are being tracked and monitored by our project management team, which has been implemented and is being led by one of our senior staff that has accepted this position full-time.”
 
So responsibilities have been identified and assigned, there is specificity as to goals, and progress is being measured. Good. “…the plan,” he continues, “calls for an increased focus on our 3 flagship brands of Quiksilver, Roxy and DC, each with a clear plan and a clarified brand positioning. Modest sales growth [2.5% a year, though they believe that conservative], improved cost structure and increased investment and demand creation. We believe the plan, when fully implemented in 2016, will improve EBITDA by approximately $150 million compared to fiscal 2012 results.”
 
As we talk about driving operational efficiency, I want to share with you what CEO Mooney calls an extraordinary statistic. I was kind of past extraordinary to jaw-dropping and I’d love to know what his reaction was the first time he heard this.
 
Quiksilver “…purchased 100 million units of products annually, but our average order placed at the factory level is only 1,400.” The silver lining in that humongous cloud is that it gives some credibility to the goal of $150 million in additional EBITDA by 2016. There’s got to be an awful lot of money to be saved there.
 
In the process of changing that, the company will go from a regional to a global organization. They expect to go from 620 to 230 vendors and from 51,000 styles developed annually to 31,000. They’ll have global rather than local design and sourcing (going from 21 to 2 locations where those functions are carried out) and will consolidate warehousing by eliminating those that are redundant under the new structure.
 
Operationally, this plan is similar to what Billabong CEO Launa Inman is implementing at that company. In fact, you’ve probably noticed that lots of companies, and not just in our industry, are trying to drive more dollars to the operating income line by getting more efficient.
 
CEO Mooney had an interesting comment on marketing I’d like to share:
 
“In the area of marketing, we have exited or canceled most event sponsorships and released a significant number of sponsored athletes who we were not able to activate [They’ve still got 500]. Over time, we expect to further reduce both the number of sponsored athletes under contract and the events we sponsor. Importantly, we will redeploy the marketing savings to focus on permanent and seasonal in-store display, print advertising and social media.”
 
My interpretation of that comment is, “We’re focusing on the fashion business rather than the action sports or surfing market.” As a public company, that’s probably what they are required to do and I know it. However the danger, as I’ve written, is that they are going to find themselves competing with way bigger companies for customers with whom their brands don’t resonate in the same way they do in surf/action sports. I’ve proposed a solution for the problem (See Let’s Review above) but it’s hard to adopt as a public company with pressure to grow revenues. I take solace in their planned growth rate of just 2.5%.
 
And I also take solace in how Andy Mooney talks about what happened to DC and what they are doing differently.
 
“The other growth that was generated 12 months ago [By DC] was really driven by moving fairly aggressively into the mid-tier channel. With hindsight, that could have been done a little bit more thoughtfully in terms of segmentation strategy. So we’re committed to having a multichannel strategy. But going forward, we definitely need to be more considerate in the segmentation of the product line so that each of the channels can meaningfully coexist and continue to have good sell-through.”
 
Those are the words of somebody who understands that distribution is complicated and matters, and who realizes that one of his brands was pushed to grow a little too hard. Or at least that what I hope he thinks. He specifically states later on that they don’t expect to push the Quiksilver brand into new channels.
 
That there is a ton of money to be saved at Quiksilver by rationalizing and coordinating design, production, and logistics and reducing SG&A I don’t doubt. Wish they’d started sooner but, as is often the case, it just took a new management team. I am still unsure where growth is going to come from. However, it sounds like management is cognizant of the importance of distribution as a brand building tool, as indicated by the low level of expectations they are creating for revenue growth. If they can be patient with their distribution, we may all be pleasantly surprised with the results down the road.

 

 

26 replies
  1. Glenn Brumage
    Glenn Brumage says:

    Hmmmm, so this begs a question. While there isn’t any doubt that there are a ton of poor performing products in a brand with 51,000 styles, will they homogenize the offering so much as to become a commodity brand and be forced to compete against GAP, H&M, Zara or, for that matter, OP at Walmart?
    I know from experience that different countries and cultures require different design paradigms.

    This whole change up for both Quik and Billabong is going to be interesting. Looks like there is now room for smaller faster innovative brands………..

    • jeff
      jeff says:

      Hi Glenn,
      51,000 styles aren’t out there all at the same time I don’t think. In addition, I think it’s 51,000 skus, not styles. Would be fewer styles, but still an amazing number. I will never forget when the Sims Japanese snowboard distributor wanted red- but not the red we were using. I could hardly tell the difference. Learned a lesson that day. I think, Glenn, that it’s possible that there is so much opportunity to cut costs through rationalizing design and production and so little immediate opportunity to increase revenues that they may have no choice but to make common products across geographies. And if, as I’ve suggested but is hard to do for a public company, they managed their distribution to improve brand positioning, they might just find that the issue of making perfectly country appropriate product could be reduced.

      Thanks for the ideas,
      J.

  2. Bob Hall
    Bob Hall says:

    Note to Quick: Better take a close look at how VF managed to build, while minimizing “core” defections.
    Note to Action niche brands: You just caught a break…lots of OTB up for grabs!

    • jeff
      jeff says:

      Hi Bob,
      Yes, VF is doing a fabulous job with Vans. But with a goal of getting to $1 billion, Vans has some more growth room than Quik. All action sports brands, if that what they are, are niche brands.

      Thanks,
      J.

  3. RB
    RB says:

    I believe that was 51,000 styles over the 3 brands. The reality is that SKU reduction creates efficiency and ultimately the discipline can manifest itself by producing a higher quality product range, while saving millions on development and sample costs.

    The action sports market is in consolidation, and like it or not every unit of apparel or footwear competes with every other as long as they are targeted at the same consumer & sold at the same distribution channels. Quik has been competing with Gap, H&M, Hollister, Abercrombie, and all other brands the target the 10-34 y/o consumer in the same sales channels… OP at Walmart is a different consumer altogether.

    As for opportunity for smaller faster brands, making a move in a consolidating market is dangerous, and today considering the inherent risk of being in any retail related business, being a small apparel or footwear company targeting action sports is a dangerous proposition. Even though Quik has its issues, they have significant brand equity and resources, and are still having a hard time. Being small regardless of how fast is still far from ideal in todays consolidating retail environment.

    As for Bob’s comment: VF is a much better run company that Quik, and has considerably more resources and a better structure and scale. (Unless VF buys Quik) They may not be able to make up for the years of gross mismanagement.

    • jeff
      jeff says:

      Hi RB,
      I’m sure it’s over three brands. I should have specified it.

      I’m still a believer in smaller, newer brands- as long as they can identify a market position and identity that differentiates them. I’d argue, and thought the comments in the conference call proved the point, that they aren’t an action sports brand any more. Hell, how can you be with revenues of $2 billion?

      Quik has never really recovered financially from the Rossignol debacle. And I know that distraction didn’t help them running their brands well.

      I would love it if somebody (not necessarily VF) bought Quik and took it private. I think, like Billabong, they’d be much better off as a private company.

      Thanks,
      J.

      • RB
        RB says:

        Considering the state of what was once a thriving young industry, it would be easy to argue that action sports is now just another category at mall stores, department stores, mid tier, and sporting goods.

        Regarding “the Rossignol debacle” : seems that if you buy a company that is bleeding, and you let it continue to bleed (uncontrollably) for 5 years, that the public company executives who allowed this to happen quarter after quarter and year after year for 5 years might have been held accountable. Those were the same people making decisions on how all of Quik was run for a long time. I don’t think the 700 million in debt is all from Rossi, they sold Cleveland golf for 130 million and got 50 for Rossi, so they recouped 180 million, that leaves 320 million from the Rossi purchase and 380 million in other debt? Can’t blame Rossi forever, someones going to do the math sooner or later.

        • jeff
          jeff says:

          RB,
          I’m with you. I never blamed Rossignol. I thought the responsibility lay with the people who bought it and with the price they agreed to pay. But you lay the financial impact of that on top of the collapsing economy, and you have a recipe for a mess. If your balance sheet is strong, a recession can be an opportunity for some. If it’s weak, it just gets weaker. And there’s more to a business mess than the financial piece. Executives lose credibility, they aren’t focused on running the business, and employees have no idea if they are going to have jobs and what the direction of the company is.

          Thanks,
          J.

  4. AW
    AW says:

    Hi Jeff,
    Greetings from Australia. Thanks for sharing, we definitely live in interesting times. The negative media publicity surrounding Billabong and now Quiksilver is no doubt affecting consumer sentiment. “Arent they going broke?” is a common question.

    My concern is if Quiksilver shed more athletes and events they will be bordering on becoming irrelevant. What will they stand for? “the boardriding co” becomes “the vanilla bean chino co”? Lose the core at your peril.

    What do you think?

    • jeff
      jeff says:

      Hi AW,
      As I said in the article, it looks to me like they are positioning themselves as a fashion company rather than a surf/action sports company. I further said, and have said before, that it’s kind of what public companies, pressured to grow revenues, have to do when the core market is so small and the fashion market so big. Whether they can compete as a fashion company is uncertain, but it’s a steep hill to climb. Zumiez is the only action sports based public company I can think of that has succeeded but not been acquired.

      Thanks for the comment,

      J.

  5. Chuck
    Chuck says:

    Small brands love to hear what Quick is saying. It is freeing up premium shelf space as we speak. For Quick to keep gross margin up there needs to be on the men’s side demand for the brand and the products they make. To bet on Roxy is scary since we know that is fashion driven and Quick is a long way from being quick on its feet. The fact that they could not get the DC move to mid-tier right when the Vans model is out there to look at speaks volumes.

    At the end of the day, any important trend setting retailer will look at this guys comments and reduce, or cancel his Quick PO’s. Totally agree with your point, his strategy is one that may work in a private environment, where you could fall back a bit more.

    • jeff
      jeff says:

      Hi Chuck,
      I hadn’t focused on the idea that some of Quik’s moves makes things easier for retailers. Really good point. Fewer brands, more focus and less shelf space required for the brands that are left. Or, of course, room for other brands.

      I don’t have information on what went wrong with DC’s move to mid tier. Obviously, it can done right, as you point out, as it was with Vans. My guess is that Quik was pushing DC too hard as the only source of growth they had. I was afraid they would. It’s that public company pressure for growth again.

      Thanks Chuck,
      J.

    • jeff
      jeff says:

      Cut that out, Y.K.W. As I keep saying, I still don’t know where the sales growth is going to come from.

      J.

      • You Know Who
        You Know Who says:

        That’s the whole point, there will be no growth in sales. It’s over. Next stop Target. I hope Mike & Pete have their feelers out as they are headed out the corporate door as well. But that’s another story. Mickey don’t surf!

        • jeff
          jeff says:

          Hi YWH,
          I’ve already heard from a couple of sources that Mervin is on the block. Not a surprise given the position the CEO has taken that the focus is Quik, DC and Roxy. They’ve already got DC in Pennys. Is Target any worse? But what choice do public companies have?

          J.

          • You Know Who
            You Know Who says:

            I think there is a choice. The classic mistake companies make is thinking they have to grow a given brand forever. They don’t. Or they make the mistake of doing line extensions like what they are doing with Roxy right now moving into exercise. There is nothing wrong with growth, but there is always a limit. Once you have a substantial market share or you have saturated a given market (Surf for instance) acquire another brand. As Bob Hall pointed out. Last time I checked, the VF model was working pretty well. What the new CEO doesn’t understand is that Mervin is a gym. It brings tons of credibility to the company (Quiksilver), which should strengthen their overall winter efforts in apparel. It’s not always just about top line sales. His comment about wanting to morph Quiksilver into a “Fashion Brand” sent red lights flashing in my head. I think this guys is probably really, really smart. But I think he has been miss cast. He is the wrong guy for Quiksilver at this time. Just sayin.

          • jeff
            jeff says:

            YKW,

            I have exactly the same concern you do with regards to new management, but hope I’m wrong. It appears that some years ago, Quik had the same thoughts you have about not being able to grow a given brand forever without screwing it up and going out and acquiring another brand. But they didn’t choose the right brand and they paid way to much you may recall. I think we agreed on that at the time.

            Thanks,
            J.

  6. You Know Who
    You Know Who says:

    The biggest unspoken problem is that Bob is not in charge anymore. He has virtually no say. So what are they to do? No one at the top has a clue! Again, I’m not saying that they are not smart guys, just in the wrong market segment. This isn’t a product to be sold to the masses at Target like Shawn White or Moss. But I am afraid that’s where they are headed. Look, as discussed before, every brand has a birth, a middle age and a death. Let’s just say that at this stage Quik is 80, you do the math!

    • jeff
      jeff says:

      I partly agree with you, but as I’ve written, I don’t think Bob could do some of the things that did need to be done. The solution is for the company to be taken private and be able to manage itself differently.

      J.

  7. RB
    RB says:

    A few thoughts to all:

    1. Spelling “QUIKSILVER” or QUIK

    2. Public companies need to generate returns for their shareholders. As Jeff often asks, Should Quik (or any seasonal action sports business) really be public? Not really a good space.

    3. Its not a problem that Bob is not making decisions anymore, although he deserves a lot of credit for getting Quik going early on, however (based on stock price and company performance) the last 10 years under Bob were disastrous for the company and big part of why they are in the situation they are in now. As CEO he got credit for the past success, but has to take the blame for the failures on his watch as well.

    4. Mervin is a unique company with some solid core brands, however not a great business to be in the public sector. as for adding “credibility” to Quik, I don’t think that is the case at all. Quik needs strong financial results for credibility in the space that it lives,and walking in the door of a retailer and saying we are a great company we own Mervin is not going to create sales or profits. Based on Moony’s strategy, selling Mervin is the right move, plus they need any and all revenues that they can generate from that sale to float the ship…

    5. Target is a better, more successful and more popular retailer than Penny. Unfortunately for Quik, target doesn’t really play in their space, not not a viable option for Quik. If it gets really bad and the trademark gets sold or licensed, then target, Walmart or sears become options, but we have a while to figure that one out.

    • jeff
      jeff says:

      Hi RB,

      1. I do, but have noticed other don’t.
      2. I think the market has evolved to a point where companies who have their roots in action sports can’t actually compete as independent, public companies.
      3. Though I don’t disagree with you, let’s not talk about credit or blame. It’s just that often the founder isn’t the person who can take a company off in a different direction it needs to go when they are the person who put the direction and culture in place in the first place.
      4. My hope, though of course I haven’t seen Mervin’s numbers, is that Quik didn’t push Mervin so hard for revenues that it damaged it’s market position and value to a buyer. Hopefully a private buyer.
      5. Target, Penney, Sears, Walmart. We can discuss channel strategy but I thought the writer’s point was that Quik, as a public company, is going to be forced to move in that general direction and I think I agree.

      Thanks for the comment. Good discussion.

      J.

      • RB
        RB says:

        Agreed on Public space not being right for action sports, but they are there and have to deal with it until something changes or they go private.

        Working at a public company requires transparency, The chairman and CEO get both the credit and the blame, not looking to disparage Bob, but the success, failure or the general financial results always fall squarely on the shoulders of that person, love him/hate him it was his responsibility to make decisions that execute the company plan. He did it early and didn’t more recently, if your mechanic of 25 years stopped doing a good job fixing your car, most people would get a new mechanic, not keep him around to consult on his history with your car as the new guy fixed it…

        If a brand is going to be part of a public company, it is going to have to contribute to the company revenue coffers. Its very unfortunate that many winter ports companies (both retailers and brands) are public, seems like thats a big part of the down fall of the business considering they’ve turned it into a 1 season in/out/sale business that has nothing to do with snow, but more about christmas and fiscal year end. If Mervin doesn’t make any money, it wont survive privately either.

        Point noted regarding channel and market expansion, but all reader should know that the primary remit for public companies is the generate ROI for shareholder. if we forget for a minute this was a brand we once loved and admired and that it was the primary driver in our 401K, most of us would be cheering them on in their quest to grow and expand and even to go don market and become a larger an more profitable company. Traditionally there has always been a disconnect when a non-Action sports leader manages an Action sports brand, but considering that both Quik and Billabong have been public for a while, they are both far from the core companies we once knew them to be.

        Keep up the reviews of public companies and the subsequent discussion, lets not pull any punches, the only way for there to be change is to expose the problem, and deal with it.

        RB

        • jeff
          jeff says:

          RB,
          Mostly agree with you. I think Mervin makes money. I think they would make money as a private company. I actually think they might make more over the longer term.

          J.

  8. Hugie
    Hugie says:

    One correction, and some comments. RB claimed the Rossignol deal was five years of “bleeding uncontrollably” and that no one was held accountable at Quik. This is simply not true. I was at Quik during those years, and the whole purchase and then selling it back was about a 3 year cycle. Bob took responsibility, and told all of us at sales meetings that the purchase era was “the worst two years of my life,” openly acknowledging that it was a debacle and placing himself at the center of it. To paint a picture that everyone in upper management just stood around letting it bleed the company for 5 years makes them look like morons, which is far from true. The first year of the purchase was marked by a horrible snow year in Europe, and a mediocre at best snow year here, so chance, or fate, or whatever you want to call it, played a part. Bad decision? Bob will be the first to tell you. But let the assessment of it be actual facts, not an exaggerated rendition of it. Also, the DC purchase was the balancing point that allowed the company to survive, also under Bobs watch, so there was a good decision that people always fail to mention when discussing the Rossignol story.

    As far as channels, whether Quik is fashion or surf, and it’s position in the marketplace, I believed twenty five years ago that Quik had left the surf space when they started selling to Millers Outpost, Nordstrom, Macy’s, and all the other outlets they’ve had over the years. They seemed to break all the laws of “clean distribution,” but got away with it by providing a good product, with good design features that the public responded to. I say “public” with the thought in mind that even twenty or more years ago, I would see a fifty year old woman wearing a Billabong hoodie or a sixty-something man wearing a Quiksilver Tee or button-up, both of whom looked like the opposite of beach dwellers or frequenters. The “biggest 5” have always known that opening a PacSun or a Macy’s or a Millers was opening up a faucet to let the public in general in on a “lifestyle brand,” and in this sense have always been just as guilty of bastardizing the culture as Hollister or any other wannabe. Nobody seems to have ever said no to a growth opportunity, and perhaps rightly so. With more money coming in, there is more money to make available to support the sport, sponsor ASP events, and so forth. I don’t see anything wrong with opening up the faucet, but I agree with you and others, Jeff, that privately held would be much healthier for this industry. Cutting pro and amateur surfers from the roster for the sake of efficiency to improve the numbers to please the shareholders is an unfortunate cycle, and does take away credibility that such companies are really there for the lifestyle.

    • jeff
      jeff says:

      Hi Hugie,

      Of course Bob took responsibility- he was CEO. I always thought once they realized the mistake that they did what they had to do to get out from under it and I respected them for that. But because I’m curious about organizational dynamics, what I would love to know is just how the original purchase decision got made. My thoughts at the the time were along the lines of “Rossignol!? Huh!? At what price! You’re kidding, right?” Some other people I respect thought the same thing. Then I think we all collectively shrugged our shoulders and said, “Well, those guys at Quik have always known what they’re doing, so I must just not get it.”

      If you haven’t seen it, I suggest you get a copy of Salts and Suits, the book by Phil Jarratt. It was Australian published in 2010 and has some interesting discussion of the purchase. But this is now getting to be ancient history, so maybe it’s time to leave it in the past. I’ve also got a copy of the Wharton Business School case study of the purchase. Contact me by email if you’d like to see that.

      Quik is fashion and surf, and that’s fine. My issue, which I’ve been raising for years now, is where can they sell now that they aren’t already distributed? This is where I get to the part where it would be a lot better if they were private and could manage their brands without the growth pressures a public company endures.

      Thanks for the comment.

      J.

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