Black Diamond explores sale of Gregory assets

Peter Metcalf tells investors that the company is exploring “strategic alternatives” for its Gregory Mountain Products business.

Black Diamond Inc. CEO Peter Metcalf told Wall Street investors Tuesday that the company is exploring “strategic alternatives” for its Gregory Mountain Products business, which could including selling the brand.

Metcalf, who was reporting preliminary fourth quarter results for Black Diamond (NYSE: BDE), said the company has retained financial advisory firm Rothschild to help explore options for Gregory.

“We know that Gregory is an extremely valuable asset,” Metcalf said. “We know that it is a committed lifestyle brand in Japan, Korea and other Asian markets and that it had significant growth opportunities both from a brand extension and from additional geographies.”

Metcalf did not clarify if a potential sale could involve the entire brand or just some of its international assets. (Update, March 3, 2014: Metcalf said sale could include "some or all of Gregory's assets").

“We are exploring the full waterfront of strategic opportunities that reside in Gregory because of what it represents as an asset and we may raise and monetize some of that value, and that's what we're exploring at Rothschild.”

Metcalf said any funds raised from a sale would be directed toward future retail and e-commerce investments, an area where the company sees rapid evolution.

Black Diamond Inc., which includes the namesake brand, Gregory, Pieps and Poc Sports reported preliminary revenue up 24 percent in the fourth quarter to approximately $60.4 million, with large thanks to its Black Diamond apparel debut in fal 2013 and growing Poc Sports sales.

For the full-year 2013, sales came in at $203 million, up 15 percent from 2012.

Looking ahead, Black Diamond officials estimate 2014’s annual sales to come in at a range between $235 million and $240 million, which would represent a 16 to 18 percent increase from 2013. That includes expanding its Black Diamond apparel lineup to 50 styles (608 SKUs) in Spring 2014 and to 119 styles (a little less than 2,000 SKUs) in Fall 2014 through 400 and then 800 retail doors, respectively.

“For orders of magnitude, we are expecting 2014 BD apparel revenue to be about 3.5 times our actual 2013 apparel revenue,” Black Diamond CEO Aaron Kuehne said.

Sell-in (sales to retailers) of the apparel has been strong officials said, with sell-through (sales from those retailers to consumers) a little more of a mixed bag. That’s partly to blame on the weather Metcalf said, whereas the West Coast and Northern Europe (key markets for the brand) have been struggling with less cold and snow compared to the rough winter that has hit many other parts of the United States.

“We are planning to support our retail as more aggressively in 2014 with investments in merchandising and fixtures that quite honestly didn't make sense in 2013, because of limited SKUs that we put into the marketplace,” Metcalf said.

He added that Black Diamond remains committed to specialty retail, but acknowledged that the company’s “own e-commerce and direct-to-consumer distribution are also important parts of our business today and will be a critical part of our business its future.”

As SNEWS reported in November, Black Diamond is exploring options to open a series of its own retail stores. “We know that a strong physical retail presence is important for the brand,” Metcalf said.

Despite the projected continued double-digit growth in 2014, investors turned bearish on Black Diamond following the preliminary results and estimates— analysts had expected slightly stronger figures — sending the stock down 8 percent on Wednesday.

--David Clucas



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