As of Thursday, January 11, 2018
With the announcement of Boardriders Inc.’s purchase of Billabong International, the surf business’s two biggest rivals are now on the same team, which means people in the surf industry are asking whether the deal is going to be a wave that lifts all boats or if it is going to be a wipeout.
“Together they are stronger,” said Joel Cooper, chief executive officer of the surf brand Lost and a career surf-industry executive. “They can source better. They can be more profitable.”
Greg Weisman, an attorney with Ritholz Levy Fields LLP who has specialized in working with action-sports brands for more than 20 years, said that better sourcing may not be the remedy the surf industry needs. A bigger corporate structure could squeeze out any special differences between the surf brands. “When you further consolidate and add additional ownership and corporate hierarchy to these brands, it suggests a move to better efficiencies but not necessarily a more compelling product or marketing story,” Weisman said.
Just after the New Year, Boardriders, formerly called Quiksilver Inc., announced it would acquire the Australian-headquartered Billabong. Billabong was founded in 1973 and is currently sold at 10,000 locations around the world.
For fiscal 2017, Billabong’s revenues totaled $762.28 million and is listed on the Australian Securities Exchange. From 2001 to 2010, the company went on a shopping spree, acquiring popular American brands and retailers such as RVCA, Element and Swell.com.
But changing fashion trends and the Great Recession set the once hard-charging company up for a fall. In 2013, Billabong had a net loss of $673.3 million, and it struggled to pull itself out of the red.
Ian Pollard, Billabong’s chairman, said that the surf giant had made progress in restructuring, but it needed help to wipe out its $116 million debt that had accumulated by June 2017.
When the deal was announced, Pierre Agnes, president of Boardriders, said the combined strengths of Quiksilver and Billabong would create more opportunity.
“Creating one integrated global platform will enable the combined company to enhance its investments in product innovation and quality, digital marketing, consumer engagement and e-commerce, which ultimately will benefit our consumers and strengthen the company and industry,” he said in a statement.
Quiksilver started in 1969 as an Australian company. Former company Chairman Bob McKnight brought the Quiksilver line to America in the mid-1970s and guided the company to become an international brand with $2 billion in sales by 2009. But it started to stumble when it acquired French ski company Rossignol for $560 million in 2005. The French brand never fit in with Quiksilver’s family of brands, which includes DC Shoes, Roxy and the Quiksilver label. Quiksilver took a hit and in 2008 sold Rossignol for $37.5 million.
Changing tastes in fashion also hurt Quiksilver. Major specialty retailers such as Pacific Sunwear cut orders for surf brands. In 2015, the publicly traded Quiksilver filed for Chapter 11 bankruptcy protection. Oaktree Capital Management then took it out of bankruptcy and made it a private company. In March 2017, it was renamed Boardriders Inc.
Lost’s Cooper said this new deal is a shot in the arm for the two most powerful surf brands in the world. “Both Quik and Billabong will have more resources than they had in the past five years,” Cooper said. “These guys are smart and know that product is king, and in my opinion they will keep the independence in their brands’ marketing, merchandising and sales.”
The deal will bring more money into the surf industry and attract more attention to the category, which will help independent surf brands, he said.
Cooper also forecasts that the recent five years of tough times for the surf business could be coming to an end.
Now that surf will be an official sport in the 2020 Olympic Games in Tokyo, there will be a bigger focus on surf. In addition, surf star Kelly Slater recently introduced the Kelly Slater Wave Co., which will produce wave pools in areas located far away from beaches.
Cooper predicts that in the near future wave pools will popularize the sport and the lifestyle far beyond the coasts. “2018 could be the start of a growth curve,” he said. “We may have hit rock bottom, but look at the history of the surf industry. We have gone through many cycles over the years, but the beauty of our industry is that it never goes away. The sport has never been stronger.”
If the surf business wants to recapture its glory years, attorney Weisman said that it needs to go back to being an industry of independent designers fueled by their own inspiration.
“Arguably what is happening today is not that grand of a change,” Weisman said. “Billabong and Quiksilver have been large, corporate entities for years. But they have to go back to what makes them special. It is their human capital. It remains to be seen if yet another slate of corporate executives is able to rekindle the magic that the original founders and visionaries had.”
So far, corporate leadership for surf brands has not saved the category from hardship, Weisman said. But hope may be on the horizon for surf. Surf brands made their design reputation on being graphics heavy and often featuring several details and bold colors. Fashion for the past decade has been minimalist, veering toward smaller graphics and more restrained colors.
“I am hopeful that with a 1990s aesthetic returning in trend, there will be a change in fits and embellishments away from years of slimmer basics, and it will mark a return to glory for surf and skate brands,” Weisman said.