Things were definitely looking up in 2004. The market appeared to be recovering -- at least in fits and starts -- consumers were beginning to travel again, and as we headed into the holiday season, it appeared at last that retailers might have something to cheer for.
As was the case in 2003, retailers who tell us they are doing better are often doing so simply because of leaner inventories and better bottom-line management leading to improved margins, although unlike 2003, more retailers were reporting sales increases and less reporting sales decreases -- a very encouraging sign.
What remains consistent from the last two years of observations is that the overall size of the market is not growing at any perceptible rate, meaning any growth by one company continues to come at the expense of another. And like in 2004, that will continue to drive the movement toward more consolidation in 2005.
It appears as if 2004 heralded a return to higher margins and, thankfully, a reversal in the trend to race toward devaluation of the industry. Thanks to continued leaner retailer inventories more products are being bought and sold at full price.
We continue to assert that this industry must find products that will capture the consumer's imagination and then have retailers willing to take a risk to carry those products. Our industry has to become one where the retailer's brand -- names like Adventure 16, Summit Hut, Nantahala, Blue Ridge Mountain Sports, Rutabaga, Great Outdoor Provision, Alpine Experience and many more -- are just as important if not more so than the brands each retailer carries on its shelves. Otherwise, we're going to see consumers continuing to shop price first (and that means the Internet as well as discount shops) and selection second -- a scenario that leaves specialty out in the cold more often than not.
As always, the very best look back at the year can be had by reading back issues of your SNEWSÂ® News Digest -- every issue is online and available for printing out at http://www.snewsnet.com/cgi-bin/snews/section_digest.html. What follows, then, is a very, very brief glimpse at a few key Outdoor stories that the SNEWSÂ® team feels helped shape 2004:
Follow the bouncing dollar -- acquisitions, consolidation and IPOs were the hot ticket
- K2 was on a tear. First it acquired Ex Officio from Orvis for around $19 million and then one month later announced it had also acquired Marmot, Marker and Volkl in a deal that eclipsed $200 million. By the end of the year, K2 had also acquired Watermark's Sospenders PFD biz, moving it into the Stearns business unit.
- VF Corp. was on a charge of its own, picking up Italian company Napapijri, then Kipling, and finally Vans Inc., the latter for a reported $396 million.
- Candover Partners Ltd., a U.K.-based private equity firm, acquired Thule from EQT Partners EB, a Swedish private equity firm, for $595 million -- nearly four times what EQT paid for Thule when it bought the company in 1999.
- In smaller, though still important deals, Spyder was acquired by Apax partners, a private equity firm for around $100 million. Burton swallowed up four snowboard brands -- Forum, Foursquare, Jeenyus and Special Blend -- with its acquisition of Four Star Distribution. Armor Holdings purchased Bianchi, and as a result, Gregory too for $60 million. Johnson Outdoors announced the Johnson family was looking to take the company private. Bula bailed out bankrupt Merkely Headgear and Outlast purchased Frisby's assets out of bankruptcy auction.
Acquisition and consolidation was just as apparent on the retail side of the fence.
- Dick's and Galyan's provided us all with an entertaining turf war that Galyan's was destined to lose -- they just didn't seem to realize it. Dick's swallowed up Galyan's and at some point in early to mid-2005 the name Galyan's will be little more than a memory.
- Gander Mountain's IPO closed at a record high -- the best non-tech IPO first day performance since October 2003. Subsequent weaker-than-expected financial reports, however, brought Gander's stock firmly back to earth.
- Cabela's one-upped Gander by seeing its IPO soar 40 percent on the first day, closing the day selling at $26 -- $113 million were raised. Not a bad day at the Street to be sure.
- Eastern Mountain Sports is purchased from American Retail Group (ARG) by the EMS management team, led by CEO Will Manzer and backed by financing from J.H. Whitney and Co.
- The year of companies closing doors or moving operations began with Duncan Robins announcing he was shutting down his newly formed, Arcata, Calif.-based, company, Boldt.
- Erehwon finally gave up the ghost and announced it was shutting down in late January (though the name has since been resurrected on a smaller scale by company founder Rudi Meyer).
- Russell put Jagged Edge on the shelf while it searches for a "suitable acquisition partner" for the brand -- it's apparently still searching.
- Watermark got out of the snowshoe biz, shutting down production of Yakima snowshoes.
- Vaude and new distributor Windsong part ways, and just like that Vaude is out of the United States. As we reported in early 2005, Vaude has decided now to open a wholly-owned subsidiary in the United States and go direct -- a good thing for both Vaude and its retail customers.
- Watershed and Nikwax part ways and in short order Nikwax established a wholly-owned subsidiary and Watershed announced it would be distributing Grangers.
- Boreal and Libonati terminate their distribution agreement, and Boreal opts to go it alone in the United States.
- Imperial Schrade shut its doors after 100 years and just like that, 250 employees were left holding nothing but air.
- The bank shuts down Walden Kayaks, locking the doors at 5 p.m. the day before Thanksgiving, leaving 16 employees out of a job.
- Nike ACG decides the U.S. specialty market is not a place it wants to play in -- for now -- and backs away. ACG gear is now only available in Europe, Asia and Nike stores in the United States.
- Two New Zealand companies, Icebreaker, which had been playing well on this soil with Gramicci's assistance, and Macpac, each decide to set up shop and make their own moves in the U.S. market.
- K2 announced it would be shutting down its snowshoe factory (manufactured Atlas, some Tubbs, and Little Bear) in Colorado and moving production to the K2 facility in Guangzhou, China. Later in the year, K2 also announced it would be closing the Tubbs factory in Vermont and moving production overseas as well.
- Wenonah announced that it would be shutting down its Victoria, British Columbia, factory and moving production to a new $2 million facility the company was building in Winona, Minn.
- Lowe Alpine shut down its Colorado offices, ending an era, and moved them to Asolo USA's headquarters in New Hampshire.
- JanSport and Eastpak announced they would be moving from Appleton, Wis. -- JanSport's equipment division is off to The North Face's San Leandro, Calif., headquarters and Eastpak is being rolled under Van's operational control.
- Watermark decides to close up shop (a few are staying behind to keep the customer service lights on) in Arcata, Calif., and move to a new corporate headquarters in Portland, Ore.
Reads like a soap opera
- In a special meeting of the board, chaired by Bob Sharp of American Capital Strategies, Confluence fires CEO John Bergeron, then proceeds to announce the hiring of Rich Feehan, formerly of Johnson Outdoors, as the new CEO, then has to backpedal furiously after Johnson obtains a retraining order barring Feehan from taking the job. By the end of the year, Confluence still did not have a CEO in place and Sharp never once was able to offer up a satisfactory explanation as to why. The only bright spot in the CEO search debacle is that the company continues to be led on a somewhat permanent basis by an outstanding team of executives who make up an ad hoc president's committee that includes Kelley Woolsey, the talented and outspoken vice president of marketing and sales, and Miriam Beckman, as solid a company CFO as you'll ever find, among others. Perhaps not having a CEO isn't such a bad thing after all?
The lawyers were certainly racking up the bucks
- Glenwa (Cobra Kayaks) got the ruling it had been waiting for in late March -- two of Johnson Outdoors' patents were ruled invalid, and it was also ruled Cobra did not infringe on a third.
- Black Diamond (no, not that one) and Black Diamond Equipment (yes, that one) engage in a legal skirmish over trademark infringement and who has the ultimate right to produce apparel using the Black Diamond name.
- Black Diamond Equipment notifies potential competitors that its Camalot patent would be "rigorously defended" until its expiration in the United States in September 2005 and in Europe about one year later.
- Wolverine sues Kohl's and Harbor alleging Merrell-brand patent infringement.
- Deckers decides to take on companies in New Zealand and Australia, and in the process stirred up the cultural heritage hornets, by asserting Decker's exclusive right to the Ugg name as a trademark -- even some in Parliament took umbrage since Ugg is a common term used to describe a sheepskin boot.
- â€¦And we won't even begin to touch on the myriad bankruptcy filings and smaller legal tussles that keep the SNEWSÂ® editorial office lights on way too late at night. Doesn't our industry have anything better to do than pay lawyers? You know, like find more customers and spend money on, say, marketing programs? Apparently not.