Volcom’s New Positioning and Kering’s Half Year Results

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Back on July 9th, Volcom presented a new brand vision to a group of 100 retailers and media people. I wasn’t invited so all I know is what was reported in Transworld and a little that some people have told me.

Last week Kering, Volcom’s parent company, released its results for the 6 month ended June 30, 2014, so this seems like a good time to touch on both and the relationship between them.
Just to remind everybody, Kering’s 2013 revenue was 9.7 billion Euros. Its Luxury Division, which includes 13 brands, like Gucci, that I’d characterize as high end provided 67% of its revenue. Its Sport and Lifestyle Division (S&L) provided the rest of the revenue (3.25 billion Euros) and includes Puma, Volcom, and Electric. “The PUMA Group owns the brands PUMA, COBRA Golf, Tretorn, Dobotex and Brandon.”
Puma’s 2013 revenue was 2.002 billion Euros and its “recurring operating income” was 192 million Euros. Volcom and Electric together had revenue of 245 million Euros and generated “recurring operating income” of 9 million Euros. Puma, then, dominates the S&L division.

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$800 Sneakers

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My research department sent me “The Key to Selling an $800 Sneaker” from the Wall Street Journal.  Personally, I’m not in the market for any of those, but I thought the article said a few interesting things.

The first interesting thing is that there is such a thing as an $800 pair of sneakers. Even more interesting is that Saks Fifth Avenue, according to the article, will have 200 sneaker models priced above $700 this fall.
Now what do I do? I mean, part of me is laughing hysterically at the fact that this product exists and that somebody is apparently, actually, buying it. But part of me respects the guy (Jon Buscemi) who created and figured out how to market it. Jon, 39, started out as a stockbroker and along the way spent some time at DC Shoes. I doubt he has any plans to sell his sneaks at JC Penney.
In fact, he barely plans to sell them at all and is specifically creating a brand known for its scarcity. 400 pairs a year ago lead to 4,000 pairs in January and currently 8,000 pairs are being sent to 50 retailers.

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Another Tactic in Integrating Online and Brick and Mortar

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A reader pointed out to me that Zumiez has started (don’t know exactly when) a program they call “Order Online Pay in Store.” You order it online, selecting “pay in store” when you check out, go to the store within 48 hours and pay for the item, and it’s shipped to either your home or the store. Per normal procedure, there’s no shipping charge if you pick it up at the store. If the item should be available at the store, you just come home with it.

Why might Zumiez do this? Will it generate any incremental sales?
With a weak economy, high teen unemployment, and the credit card companies no longer making “having a pulse” the criteria for getting a card, there are probably a bunch of Zumiez customers and potential customers that don’t have a credit card or don’t want to use it because they’ve figured out that if you can’t afford to pay off your credit in full at the end of each month, you can’t afford to use it. This gives them a way to shop on line but, and Zumiez has to love this, still gets them into the store.

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Trendwatching.com’s free newsletter

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Trendwatching.com offers a free newsletter you might want to check out. Their more or less monthly discussion of what brands are doing to reach customers is worth your time, and the price is right.

The Sport Chalet Acquisition and Their 10K; Some Perspective

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Sometimes we just get lucky. I guess that’s you get lucky, and I get to review something like 650 pages of small print- the estimated total (so far) of documents filed by Sport Chalet between their 10K and the deal.

I’m not going to do quite the typical review of a public company’s financials that I usually undertake. I’ll do a brief review of the 10K with the goal of explaining where and how Sport Chalet got to where it got. That will set the stage for a look at the deal and how they made one. I’m not so interested in explaining what the deal is (I imagine you’ve read that) as in talking about the process and dynamics of how they got there. Let’s get going.

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What This Industry Needs is More Sunglass Brands!

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Well, you have to admit I got your attention, and that title is way more intriguing than “What I Learned at Agenda.” I never thought I’d say this about any category, but I think there may have been more sunglass than shoe brands. And if case anybody is actually confused, that title is written in the full bloom of major sarcasm.

If you are in the sunglass business, I hope your price points are either around $20.00 or north of around $150 and very boutique focused. I know the margins have made this category very attractive (hence all the brands) but I’ll be surprised if the competitive landscape allows those margins to persist – especially in the crowded market middle.

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Pretty much the only thing I pay for online

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Really, really, really want to know what’s going on in the world in a straight forward, no bullshit, analytical way that you won’t come close to hearing in the mainstream media?  Sign up for Stratfor. This is pretty much the only thing I pay for online.  But if you understandably don’t want to pay, there’s a free sign up where you can receive occasional articles.  And if you should decide it’s worth a few bucks, don’t pay the asking price.  They will negotiate!  I know.

GoPro Goes- Public, That Is. A Look at the Final Prospectus

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As pretty much everybody knows, GoPro went public last Wednesday. How refreshing to see a company go public that’s actually making a product and money. GoPro sold 8.9 million shares of its class A common stock at $24 a share and raised a bit less than $200 million. $110 million will go right out the door to repay a line of credit they took out so they could pay a dividend to shareholders back in December of 2012.   Hmmm. Wasn’t January 1, 2013 when taxes on dividends went up?

Existing shareholders sold an additional 8.9 million shares, but the company won’t see the proceeds from that. I should also note that the class A shares will have just one vote per share. Well, that’s not so weird, but what should be noted is that the class B shares will have ten votes per share. What’s the result?

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Quiksilver’s Quarter: The Impact of Market Trends

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In the quarter ended April 30, Quiksilver’s revenue fell 10.4% from $456 to $408 million. The net loss grew from $32.4 to $53.1 million. Discontinued product lines contributed $9 million to revenue in last year’s quarter, but none in this year’s. A year ago, they also owned Mervin and the Hawk brand. I’m a little surprised they didn’t mention how much revenue those brands contributed a year ago.

I’ll spare you a long quote from CEO Andy Mooney on the profit improvement plan (PIP), but basically he says, we’ve done what we said we’d do and we’ll do more. He notes they’ve cut brands and product lines, are rationalizing sponsored athletes and event participation, licensing peripheral products, closing losing stores, reducing headcount, managing expenses down, centralizing merchandising and design, cutting SKUs and factories, and reducing SG&A.
But then they announce that they are pushing back the PIP profit target for a year to the end of fiscal 2017. Why, if they are doing all this good stuff, is that necessary?

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Can the Golden State of Mind Take Hold? PacSun’s First Quarter

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Though PacSun still reported a loss in the quarter ended May 3, the income statement improved compared to the same quarter last year. Sales were up 2.9% from $166.4 to $171.1 million. The increase was the result of comparable store sales being up 3% compared to last year’s quarter. The average sales transaction was up 6%, though the number of transactions was down 3%. Ecommerce sales during the quarter grew 6% compared to last year’s quarter and represented 7% of total sales.

The store count was down to 618 from 638 a year ago. They expect to open four stores during the remainder of the year and close another 10 to 20.

 The gross profit margin rose from 25.1% to 26.1%. The merchandise margin rose 1.4% but increases in other costs left Pacsun with a net gain of 1%.
Selling, general and administrative expenses fell slightly from $52.8 to $52 million. As a percentage of sales they were down from 31.7% to 30.4%.
Higher sales and gross margin combined with unchanged SG&A expense meant that the operating loss fell 33% from $11 to $7.4 million. The net loss was $10.4 million, down from $24.2 million in last year’s quarter.
In between operating income and net income is the dreaded “(Gain) loss on derivative liability” which is related to the 1,000 shares of convertible series B preferred stock issued to Golden Gate Capital as part of a $60 million term loan they got a couple of years ago. In last year’s quarter, it was reported as a loss of $9.3 million. This year’s quarter showed a gain of $1.2 million. That’s a cumulative difference of $10.5 million before the impact on income taxes.
I imagine most of you will be both thrilled and relieved to learn that I am not going to spend time discussing how those numbers are calculated. Feel free to review footnote 10 of the 10Q here if you just can’t stand not to know.

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