Sector9 Co-Founder Discusses Billabong Deal

The fireworks and celebration began a bit early this year over at Sector 9 after it was announced on July 2nd that Billabong had purchased the brand. Transworld Business was able to wrangle a few minutes of co-founder Steve Lake’s time after the smoke lifted momentarily to get his thoughts on the deal and what it means for Sector 9 and Gullwing.

Transworld Business:
How long has this been in the works?

Steve Lake:
We first spoke of the possibility in January of this year.

TWB:
What does this mean for Sector 9?

SL:
This means we will have access to resources we never imagined possible for Sector 9. Our team will now have a much larger platform from which to grow the business both domestically and internationally.

TWB:
Do you see a lot of synergies?

SL:
Billabong has the most successful multi-branded platform in our industry. They are an industry leader with an amazing global footprint and our synergies are plentiful.

TWB:
Any new initiatives you have planned now that you have deeper pockets?

SL:
Not all new initiatives take deeper pockets to execute. Our merely having a mentor to help us avoid the inevitable costly mistakes in growing our business is what we look forward to most.

TWB:
Do you foresee being in more doors now?

SL:
Yes, especially internationally where there remains tremendous growth opportunities for our brand.

TWB:
Will you have to pull out of some of your current accounts?

SL:
We have no intentions of changing any of our retail account base. All of our accounts so far have been very supportive of this deal and they can look forward to even better products and customer service from Sector 9 in the future.
TWB:
What are you most stoked on about this deal?

SL:
We are excited to be part of such a dynamic and forward thinking group. The same crew that grew Sector 9 from the backyard to this point will now be armed with the best horsepower in the industry. We’ve set some pretty lofty goals for ourselves and now we have no excuses but to reach them and we’re up for the challenge.

TWB:
How will oversight/reporting with Billabong work?

SL:
I’ll let them answer this question if they want to. I will say that our crew that got us here remains intact and if history repeats itself we will operate autonomously within the group.

TWB:
What can we look forward to as far as design collaborations?

SL:
Lot’s of really good stuff…

European Economy Slows, Data Shows

As the U.S. economy sputters, Europe has been the bright spot for many companies, including those in the action sports sector.

Quiksilver European revenues increased 23 percent to $284.5 million in the quarter ended April 30, with some benefit from exchange rates. Volcom’s European revenue in the quarter ended March 31 reached $25.2 million, above the $21 million plan. Billabong’s European revenue rose 19.6 percent in constant currency terms for the six months ended Dec. 31, 2007.

But recent economic data shows that a slowdown has started in several European countries.

A key measurement, the Purchasing Managers Index (PMI) for the Euro zone manufacturing sector contracted in June for the first time in three years, the Wall Street Journal reported.

Unemployment also increased for the second straight month in May in the Euro-zone.

Denmark technically slipped into a recession after gross domestic product contracted in the first quarter, the second consecutive quarter of contraction.

As reported on shop-eat-surf.com: July 8th, 2008
Economists believe Italy, Spain, Portugal and Ireland are most at risk of following Denmark into recession. The gross domestic product fell in Ireland and Portugal in the first quarter, and Italy just missed a second consecutive GDP contraction in the first quarter.

In the U.K., which is outside the Euro zone, the PMI fell in June to 45.8, down from 49.5 in May. A PMI reading below 50 signals a contraction in manufacturing.

The U.K. is facing falling housing prices and tightening credit conditions.

Retail data there show consumers are still spending, but appear to be switching to less-expensive food and clothing stores.

In May, U.K. retail sales rose a healthy 3.5 percent from April, the Wall Street Journal reported. Asda, a discount chain owned by Wal-Mart, reported a sales increase of 7.5 percent for the quarter ended June 15.

However, upscale British retailer Marks & Spencer, the largest clothing retailer in the U.K. which also operates high-end food stores, reported a larger than expected 5.3 percent drop in same-stores sales for the quarter ended June 28. In all stores, sales fell 0.5 percent.

Marks & Spencer CEO Stuart Rose said he expected the tough conditions to last two years

Anemic Forecasts For Back-To-School Sales Prompt Retailers To Ramp Up Campaigns

As reported on Style Sight: July 7th 2008

The critical back-to-school season is now officially underway and with the anemic expectations that retailers will post sales growth that is flat to slightly negative between July 4 and Labor Day, reported The Wall Street Journal. The downturn is a bitter one in comparison to last year’s 21% increase in sales to $65.7bn, and reflects just how severely the slowdown in the U.S. economy, inflation, rising costs of living and unemployment are hitting consumer wallets. (Photo Credit: WSJ)

Experts are predicting that essentials, such as textbooks and laptops, will slow down sales of apparel, but even within the electronics sector, there is a no clear must-have gadget. The harsh reality of what’s ahead has retailers such as Kohl’s Corp., J.C. Penney Co. and Macy’s Inc. all ramping up their B-T-S campaigns earlier and offering more exclusive offerings to lure customers.
Kohl’s has launched a back-to-school exclusive girls apparel and accessories line by singer Avril Lavigne as one of it star attractions as it kicks its biggest back-to-school campaign ever next week, a week earlier than usual.
J.C. Penney is launching five exclusive brands this month, its largest grouping ever launched simultaneously. “It’s a huge time of the year for us, and we’re spending against it,” Mike Boylson, Penney’s chief marketing officer told the newspaper. The retailer has created an online game called “DorkDodge,” to promote the new lines. It will also air a 60-second spot in theaters recreating scenes from the 1985 teen film “The Breakfast Club.”
The retailer also announced Monday the launch of its new Dorm Life private home brand, a modern lifestyle brand that targets college students. Prices range from $3.99 for a bath towel to $39.99 for a comforter.
Macy’s, not to be outdone, begins filming a documentary next month following five young adults as they road trip across the U.S., visiting 12 cities to meet musicians and music producers while wearing clothing by Macy’s American Rag label. The 10-episode show, titled “Ragged Road,” will begin airing on YouTube.com in September. It will feature live video blogs.

U.S. Payrolls drop by 62,000 in June, Unemployment Rate Still at 5.5%

As reported on Style Sight.com July 3rd, 2008

Sixty-two thousand jobs were lost in June, marking the sixth consecutive month of layoffs in the U.S., as soaring fuel prices absorbed economic stimulation and prompted companies to reduce costs, reported Bloomberg. The unemployment rate stayed at 5.5% after a record jump in May, but continued job losses suggest that consumer spending will continue to slow, signaling that more bad times are ahead for our nation’s retailers. Retail payrolls fell by 7,500, following a 22,600 decline in May.

For the first half of 2008, 438,000 jobs were lost in total, reversing the 91,000 jobs generated by the economy each month on average in 2007.
Federal Reserve policy makers may delay their first interest-rate increase since 2006, according to Bloomberg.
“As long as the consumer is facing these headwinds, it’s going to be very tough for a major turnaround in employment growth,” Kathleen Stephansen, head of global economics at Credit Suisse Holdings USA Inc. in New York, said before the Labor Department issued its report in Washington D.C. “There is very little room for the Fed to do anything.”

For Full Bloomberg Article Click Here

Dick Baker on the recession

I wanted to get some thoughts on the recession from Dick Baker so I called him the other day to tap his expertise.

Dick is an apparel industry veteran having run Op for years, served as president of Esprit and launched Tommy Hilfiger women.

He offered some opinions on why this recession is different from the past. He also talked about distribution trends he sees coming.

I should preface the piece by saying Dick believes the surf industry is performing better in the downturn than most sectors. And, even though the big box stores (Target, Kohl’s, Wal-Mart, Kmart) are making another run at creating or buying surf or action sports brands, “Kids still want the authentic, cool brands,” he said.

Here are Dick’s thoughts about the current climate and other issues.

“This economic slowdown is different from previous recessions because the scale of the surf business is so much larger, so the issues that go along with surviving in a recession are magnified. You now have large, publicly-traded companies operating on global platforms. It’s not 10 years ago when you had a few $30-to-$40 million companies trying to figure things out.

“I don’t see any clarity about the economic climate emerging until 2009.

As reported on shop-eat-surf: July 7, 2008

“The three biggest issues facing core stores and brands this time around are:

“1. Credit. The dynamics have changed. In the past when companies were smaller and private, they could carry core store operators who were having trouble paying. Now, some of the large, publicly-traded companies have shareholders to answer to and smaller companies need to get paid as well. Plus, some companies such as CIT are having problems of their own, so are looking to collect every dollar they can. This has led to a credit crunch for those retail accounts that are slow to pay, and I don’t think it has run its full course yet.

“2. The development of the brands and scale of the brands have grown so large, but there has not been a major increase in the number of core surf shops. Brands need to grow, and doing significantly more business with core shops will be difficult sheerly because there are a limited number of core stores. So where is the growth going to come from? The smart brands will protect and ensure they are successful at the core level while seeking other distribution. Also, the internet has the single biggest upside as both a wholesale customer and a direct brand vehicle. But it also has the biggest investment required.

“3. There will be an influx of brands opening stores or acquiring stores. There are three models for this. A single-brand store where a company opens a store and only carries its own brand. But it’s challenging to be successful selling one brand that reflects one lifestyle and getting the product right all the time. Or, brands will acquire multiple location core surf shops where they keep selling other brands in addition their own. A third option is to acquire multiple brands to include in their retail strategy.”

Kohl's Shares Up After Licensing Deal with Hang Ten

As reported on Transworld Biz June 16th, 2008

According to an Associated Press story posted June 12, by Business Week: “Shares of Kohl’s Inc. advanced on Thursday, after the government issued a positive May retail sales report and the company reported a licensing agreement for lifestyle brand Hang 10.

Kohl’s shares rose $1.52, or 3.6 percent, to $44.11 during afternoon trading. The stock has traded between $37.31 and $73.38 during the past 52 weeks.”

To read the full story, go to Businessweek.com.
For more details on the licensing agreement between Hang Ten, Quiksilver and Kohl’s, click HERE.

QuiksilverEdition Simplifies Marketing

QuiksilverEdition Simplifies Marketing, Now Branded Quiksilver Men's

click here to read the story. Posted on Transworld Surf Biz July 1st, 2008

Cheyne Magnusson Photoshoot

I did a photoshoot with Cheyne Magnusson yesterday for the Dive N' Surf "Find Your Passion" campaign. Cheyne just got back in from Australia and drove straight from the airport to our offices to do the photoshoot. Even though he was tired as hell and feeling the effects of a mystery sleeping pill he still showed up and did the shoot. We took some shots over at Malaga Cove and knocked it out in less than an hour. We got back to the office and Cheyne was on his way back home to San Diego where he said he can't wait to sleep in his bed. Cheyne is home for a few days than off to Seattle to see his girlfriend and from there to Bali to hook up with photographers to get some exposure.

SAVE TRESTLES

Save Trestles as reported on Transworld Surf website. July 1st, 2008

Billabong acquires Sector 9 for its latest buy

As reported on shop-eat-surf.com July 1, 2008

Billabong acquires Sector 9 for its latest buy