Some Insight from Rip Curl

A reader sent me the article below that was published in the Australian on March 12th. I’d love to just provide you with a link, but The Australian would want you to sign up for an account and pay them money. I don’t blame them, but I doubt you’re going to do it and I thought you’d find this interesting.

You may recall that Rip Curl had some hard times and went through a restructuring back in 2013. It worked out, and Rip Curl director Tony Robert’s explanation of why is worth reading. He says in the article that

“…he believed the group had managed to avoid the worst of the global financial crisis and extended downturn in retail conditions because, unlike its bigger rivals, Rip Curl had stuck to its core product lines.”

“We are more of a core surf brand than either key competitors. They both grew bigger than us but in growing bigger they stretched into that non-core market more than we have and we have been very true to our roots in terms of our core products.”

Regular readers know I’m not necessarily against a brand expanding its market reach. But I believe it has to be done thoughtfully because there comes a time when your newly sought after customers may know your brand but not your story- then how are you going to compete? Anyway, the whole article is below.

·      Surfwear retailer Rip Curl valued at AUD310m after share buyback

·      The Australian March 12, 2015 12:00AM Eli Greenblat, Senior Business Reporter

Privately owned global surfwear retailer Rip Curl has been valued at $310 million by directors after the board approved a share buyback form former senior executives no longer with the company.

This compares with a $400m price tag placed on the iconic surfwear group two years ago when it was planning a sale, possibly through an initial public offer, which was later abandoned due to tough market conditions that slashed its earnings along with other brands in the retail category, such as arch rivals Quiksilver and Billabong.

Rip Curl director Tony Roberts told The Australian he believed the group had managed to avoid the worst of the global financial crisis and extended downturn in retail conditions because, unlike its bigger rivals, Rip Curl had stuck to its core product lines.

“We are more of a core surf brand than either key competitors. They both grew bigger than us but in growing bigger they stretched into that non-core market more than we have and we have been very true to our roots in terms of our core products,” Mr. Roberts said.

“For example, our wetsuits are our champion products and have been since the company was founded; probably that’s one reason why the GFC didn’t hit us as hard as it hit them.’’

Mr. Roberts confirmed the positive benefits of a restructure forged two years ago — which initially plunged the group into the red — had flowed through to 2015 with the surfwear retailer on track to reap its third consecutive full-year profit.

“Like a lot of retailers, and we are not a pure retailer, retail conditions are tough and patchy,” he said. “That’s a good way to describe them, both around Australia and globally. But we are performing well and are strong in some markets.”

Documents lodged with the corporate regulator show Rip Curl posted a 63 per cent increase in full-year net profit to $23.32m in the 12 months to June 30, 2014, as revenue increased 7.8 per cent to $429.58m.

“We had a great year last year and we are continuing to be above last year but definitely we are finding the way tough,’’ Mr. Roberts said.

He said the core business, selling surfwear products and apparel through independent surf shops, continued to be strong, while the “aspirational” side of the business — selling to customers who were not surfers but aspired to take up the sport or simply liked to be associated with the sport — had “taken a battering”.

The fresh valuation of $310m on the business came as Rip Curl, founded in the Victorian seaside town of Torquay 45 years ago by business partners Doug “Claw” Warbrick and Brian “Sing Ding” Singer, sought to buy back 1.5 per cent of its issued capital from investors.

It is believed former Rip Curl chairman and current Australia Post boss Ahmed Fahour will hold on to his small parcel of remaining shares after stepping down from the board of the surfwear equipment and apparel group last year and cashing in the majority of his stock for about $3m.

The new share buyback is part of an employee share agreement struck in 2000 that allowed senior executives to invest in the tightly held private company. The buyback will see about 76,000 Rip Curl shares bought back from former executives of the company with a price tag of $63 a share.

With just under five million shares on issue it gives Rip Curl a capitalization of $310m.

Rip Curl is still controlled by founders Mr. Warbrick and Mr. Singer, who jointly own 72 per cent of the company.

The company’s third-biggest shareholder is Francois Payot, who helped create Rip Curl’s European business.

Neither of the founders or Mr. Payot will be selling into the buyback.

Turning to the weakening Australian dollar, which puts stress on Rip Curl’s margins through the higher price of imported goods or imported product components, Mr. Roberts said the impact would need to be addressed, but in the current competitive climate it was difficult to lift prices at the retail level.

2 replies
  1. You Know Who
    You Know Who says:

    Their advantage is that they are not public. Their sales and value declines are less because there business is smaller and is focused on people who actually get into the ocean. The number of those has not diminished, while Quick is still trying to sell Macy’s whose customer is only interested in fashion and has moved on for the time being. I kow I am being very simplistic in this but this is the bases for their coming through this in better shape than Quik or Billabong IMO.

Comments are closed.