TKO goes for industry "technical knockout"

Long known as a major boxing and accessories brand, TKO has set its sights on a "technical knockout" in fitness that goes far beyond boxing as it quietly enters new categories, makes acquisitions, takes on e-commerce, signs licensing deals and heads toward public trading.
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Long known as a major boxing and accessories brand, TKO has set its sights on a "technical knockout" in fitness that goes far beyond boxing as it quietly enters new categories, makes acquisitions, takes on e-commerce, signs licensing deals and heads toward public trading.

The bolder moves it began more than a year ago -- but planned since the company's inception in 1996 -- should make 2005 a "pivotal year" for the company that likes to stay below the radar, TKO Sports Group CEO and President Garry Kurtz told SNEWS®.

"Ultimately, I don't see TKO as an accessories company only," Kurtz said in a rare discussion with the media when he sat down with SNEWS® recently. "I see it in multi-facets of branding.

"I believe we'll be able to take the TKO brand and move it into the other core areas of fitness -- footwear, headwear, apparel… I see this as a brand that will transcend the accessories."

2004: Building blocks and acquisitions
Aside from quietly building a staple brand among accessories and boxing companies, TKO may not stay under the radar much longer. In late March 2004, TKO Holdings Limited began trading common stock on the Pink Sheets (TKHL.PK), often the place small OTC companies cut their teeth before they become a fully reporting and trading public company. Kurtz said the move to fully reporting Nasdaq status is slated for later this year.

In September 2004, the company announced the launch of its e-commerce website, www.tkogear.com, as well as signed an agreement with a marketing company to focus on building brand awareness.

Then, in October 2004, TKO acquired fitness equipment supplier Linex International (see SNEWS® "Did You Hear" brief, Oct. 5, 2004). In that share swap -- an exchange of all common share of Linex for 4,250,000 shares of TKO valued then at $850,000 -- Linex CEO Steve Yang became TKO's COO. The move was designed to help TKO open more doors with larger ticket items, like those Linex was having some success with at retail already -- items that a consumer would be using several times a week, which Kurtz said would help the public "begin to associate a brand."

Hardly a month later, TKO announced it was launching a 30-minute infomercial with Cory Everson touting its "Cory Everson by TKO Fitness" line, another step in creating brand name awareness.

2005: Readying for the next step
In January 2005 at The Super Show, TKO held court in a suite in a nearby hotel in Orlando, Fla., where Kurtz and senior vice presidents Mitch Carlin and Bob Harms met with clients and showed concept drawings of bikes and other equipment it expected to have ready later this year. Kurtz said he sees a "huge opening" for cardio equipment at mid-price points, partly because of the current push for the public to get fit and lose weight.

"We're looking at this opportunity in front of us very business-oriented," he said. "We're focusing on what consumers may buy."

Kurtz said TKO's growth, 2004 over 2003, was flat because it was focusing on future strategy. Linex itself was heading toward about $5 million in business in 2004 before the acquisition, he said, and he expects that line will become 20 percent to 25 percent of total TKO business. With the Linex acquisition, TKO is positioned now for another jump up this year, with nearly a 25 percent increase expected, 2005 over 2004. That won't only be from the new equipment line, but also from higher sales in its core categories such as boxing and heavy bags.

"We're ready for our next thrust in the market," Kurtz added.

With varying levels of product and enough differentiation in its categories, he said the company will sell at both specialty and big box and can still do a good job in both channels.

…And beyond: TKO more than boxing
By the Health & Fitness Business Show in Denver in August, TKO should have a showing that will introduce its plans to retail on a larger, more formal scale, with even larger initiatives still to come in the fall. Meanwhile, as it continues to integrate Linex into TKO, Kurtz won't rule out another properly planned acquisition ("I'm not interested in fringe product"), although likely not in 2005.

For now, TKHL.PK sits on the Pink Sheets (www.pinksheets.com), having opened in March 2004 at 0.60, risen in April to 0.63, danced for a few months anywhere from 0.10 to 0.35 and now sits at about 0.03 (but that means with basically no volume). And Kurtz still smiles and moves forward methodically.

"We're now in a position," Kurtz said, "where we're going to tap into a greater array of business."

SNEWS® View: The name TKO may come from the boxing world ("Technical Knockout"), but just as Everlast has transcended boxing (see our story, April 11, 2005, "Everlast jumps into U.S. fitness equipment ring"), TKO is a catchy enough acronym that could have enough appeal and snap to mean more, much more, to the public. Few brands in fitness have managed much public awareness -- either their name isn't going to sit in the memory banks long or the brands just haven't made an effort, counting on retailers to simply sell the category and, thus, their equipment. That strategy may have mostly worked … until now … but having brand recognition -- who doesn't head for Kleenex, Vaseline, Kenmore or Hoover? -- can mean a greater consumer share and greater consumer trust in what you offer. We think trust in fitness gear and equipment will be key moving forward as the country begins to encourage and push fitness because of nationally publicized and growing obesity and health problems. Companies should want the public walking into a store -- and we don't just mean the public that already works out at a club -- and asking, "Do you carry brand X?" This is already what they do to some extent with TV-advertised brands like Bowflex. If a wannabe, intimidated or obligated exerciser doesn't sense trust that what the company says, sells or promises isn't true and they won't get results, they'll turn to another. Now is the time for any company to begin that positioning. We know TKO isn't the only one headed in this direction. Certainly Everlast has made moves, Nautilus isn't standing still either, and others we can't name have similar long-term strategies. We'll be interested in which can stick-to-it for the long haul and make the leap to the next level. We don't count out TKO.

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