Bong in big trouble

[Hollowed out]

shares hit a massive low of 15.5 cents, it is simply hard to believe that Bong have lost 99% of their market value from their high point some years back.
Staff must be freaking out and how can Bong keep paying for massive team, Chopes etc.
Something has gotta snap when the rope is getting this tight. Nick, how do you see the future for Bong now?

[Nick Carroll]

I kinda can't.

No surfing business has ever been in this situation, it's uncharted territory, but other companies that find themselves in this kind of strife usually have to fail in order to succeed, if you get my drift.

It's not like the business is unsalvageable, just that the market has lost all faith whatsoever in the ability of anyone currently involved to salvage it.

What you sorta can't tell is how much this is affecting the customer's perception of the brand. People might laugh at this, the idea that bad news in the business pages could affect a brand's essential quality or appeal, but it's real. I can feel it myself, I see Billabong's daily product emails landing in my inbox right now and feel this awful vibe coming off them, a reluctance even to take a quick look at the clothing. I don't want to feel that, I'm not willing it to happen, but it's happening nonetheless. Such a contrast to the powerful successful brand of six or seven years ago.

Must be fcuken hard for a lot of the ex employees right now, the guys and girls who helped Gordon build it in the first and second places.

[Hollowed out]

total value now is $75m and debts of $300m. Banks don't wanna foreclose cause they will get nothing and a big headache as well.
Seems a MBO of staff and cashed up surfers should be co-opted by someone to form a syndicate to take it over because with the right mix there has still gotta be a really good surf company hidden under freaked out institutions who rorted it.
Nick rides into frame mounted on a white stallion with Dougal, Gordon, Boothy, Naude, Parko et al trotting down the West Burliegh rd to the cheers of a thousand staff. Have a go ya mug!

[tootr]

MBO or private equity is what is needed... Will take a couple of years to clean up the balance sheet, rationalise the mess of stores, overpaid acquistions, and restore cashflow....

BBG is far from dead, but there is some serious restructuring to do...

[aaronn]

stand outsuide any bbong store
question 50 entering customers
about bbong
how many would know or care

[alakaboo]

They bought most of it fairly recently at the top of the market, not long after buying out a heap of companies, which is a primary reason why they are now fcuked.
Commercial leases are long and inflexible. Fair bit of their debt obligation from what I gather, having a similar disinterest.

[alakaboo]

In Asian markets recently the only 'surf' brands on show were Billabong and Hollister.
Must be something still there for the bogan masses.

But I agree they look fcuked.

[Nick Carroll]

Look I'll try to break it down a bit more for aaronn's sake.

Brands like Billabong get their start by making useful stuff for a super cool, exclusive, youthful sport or activity. They grow beyond that activity because they're the label of choice for trend leaders in the grassroots of the sport. The broader market follows the trend leaders into the label.

If that was all there was to it, at some point the label would become too well-known, be worn by too many dorky followers, and be dropped by the trend leaders. The label would still sell, but it would no longer be cool -- its chances of further growth would be nullified. This is what Michael Tomson of Gotcha meant when he stated one of the surf industry's great, oft quoted mantras: "Big is the enemy of Cool."

The challenge for all the big surf companies has been how to manage this -- how to grow while simultaneously re-engaging with the trend leaders on a regular basis. How to be Big, sorta, and Cool, sorta. (Ie Nike)

It's panned out differently for all of 'em. I think Quiksilver have been clever in this area but also staggeringly fortunate. Their ultimate trend leader, Kelly, has provided an astonishing model of reinvention and re-engagement, burning out, coming back, finding new ways of staying on top, and maintaining the deepest possible respect among the surfing core worldwide -- you could not have predicted his career arc in advance. They've developed the best surf contest in the world, the Eddie, without ever trying to force it into a box to fit some conventional marketing plan, instead waiting for the Bay to call the Day. They got Dane in the door just as he went supernova.

Rip Curl don't seem to be too concerned about cool, their reputation rides on their original wetsuit making mission which automatically keeps them in touch with the grass roots of the sport. Wetsuits aren't just fashion items, they're have-tos for most of the world's surfers, and Rip Curl along with O'Neill are pretty much the best at it. If they stopped making wetsuits they'd be fcuked, but they're not gonna do that.

Billabong I think for a while was the coolest of the lot. They made way cooler moves than Quik: I mean, Bad Billys or Echo Beach? Occy at Rocky? Green Iguana? Come on! Everything about them seemed anchored in the best stuff about Australian surfing and they were also amazingly fortunate in their selection of Bob Hurley to run the US wing, Hurley has an amazing ability to spread good vibes around his world.

They lost some edge when they went public and cut ties with Hurley, like has there ever been a less cool phrase than "Only a shareholder knows the feeling"? But they had trend leaders, Occy's amazing comeback, Taj, and most of all Andy Irons, who was about the coolest surfer ever, maybe.

I can't help but think in hindsight that AI's tragic death had a seismic effect on the company from within, a lot of people felt a lot of pain and it may have shaken the company's inner confidence a bit -- may even have caused them to take the eye off the ball for a crucial period when debts were accruing and retail was busting. Maybe not, maybe it was all coincidental.

In any case -- does anyone really reckon Billabong are making big strides in reinvigorating their relationship with trend leaders right now? You know, doing cool shit? How can you do that when everything is telling you you're financially fcuked, and nobody seems to be able to do much about it?

They can't start that work till they're out from under -- and by then, will there be anyone left at the company who knows why Billabong was cool in the first place? Jeez I hope so.

[Hollowed out]

Yes ladies and gents, Nick has saddled up

[Natho]

Bad Billys, Green Iguana....holy sh1t I just cracked a hard on. They were the days.

Nick do you honestly think the death of AI had that much effect on the inner workings of Bong? Serious question as you would know more than myself. I would have thought if anything it would have given the whole branding of AI/ Bong more attention (in a sad way)?

[pinhead]

If that was all there was to it, at some point the label would become too well-known, be worn by too many dorky followers, and be dropped by the trend leaders. The label would still sell, but it would no longer be cool -- its chances of further growth would be nullified. This is what Michael Tomson of Gotcha meant when he stated one of the surf industry's great, oft quoted mantras: "Big is the enemy of Cool."

The text book response to that situation is to buy the upcoming new cool brands as an insurance policy. Which BB did but at the worst possible time.

I wonder now however if there are too many versions of cool and the image of surfing has dropped a few rungs in the cool ladder. I'm thinking of my tweenie nephews, surfing is cool to them but being a surfer isn't. So they surf but don't wear surf labels. They're heavily connected to the net and are into lots of different stuff. So even if there are people left at Bong who can remember why Bong was cool - it may not be relevant anymore. It looks to me like surf apparel as a major category is going to shrink and end up being comprised of thousands of micro brands, few of whom have the budget for sponsored riders or contests.

[Nick Carroll]

Nick do you honestly think the death of AI had that much effect on the inner workings of Bong? Serious question as you would know more than myself. I would have thought if anything it would have given the whole branding of AI/ Bong more attention (in a sad way)?

I don't know. It's half a hunch and half observation of people's behaviour in the year or so after AI's death. I'm not even sure if it's possible to break it down. But for a lot of people in Billabong it was like a death in the family and that can have huge effects, not necessarily immediately, but over time.

Maybe just put it aside, probably too painful to discuss in a business context.

[tootr]

It's not only brand management. Various incarnations of BBG management followed the time honoured road to ruin by pursuing a 'growth at all costs' strategy in an attempt to keep the post float momentum going, viz debt fuelled acquisitions-overpaying for both property and brand names, store rollouts all over the place, vertical integration, poor balance sheet control..etc etc.

It's easy to blame investors or bankers or 'the economy' or consumer confidence or whatevr, but ultimately management overreached and went the same route as babcock and brown, centro property, abc learning to name a few....

[Nick Carroll]

I think that's a little harsh tootr. You can't compare the business strategies of BBG with the farcical ABC Learning and various shithouse financial management institutions. Companies grow; that's what they do, and for a long time, plenty of people were stoked in BBG's growth. It's probably more about how the growth was managed in the face of retail change and global recession.

[PeepeelaPew]

...

[tootr]

Yes, I am drawing a long bow on that, and mentioning the BandB buccaneers in the same breath is out there, but making the point the debt fuelled-growth-by-acquisition model is high risk to say the least.... Some earlier posts in this thread seem to be blaming everything except the business model..


As an aside, on a stroll in the CBD the other day, I stopped in at a Rip Curl store just around the corner from Pitt st mall. Nobody in there, full price on everything. Not sustainable!

[pinhead]

Yes, I am drawing a long bow on that, and mentioning the BandB buccaneers in the same breath is out there, but making the point the debt fuelled-growth-by-acquisition model is high risk to say the least....!

Acquisition of smaller labels was also about not becoming the next Hot Tuna. BB had grown to the point where they were too big to be cool. They were faced with a bunch of new brands like Rusty eating their lunch. Buying up emerging labels was a good strategy assuming, they could quickly integrate supply chain and back office - but they couldn't and then they got hammered by the recession.

[Davros]

God the myriad of things that cause a firm and share price to crash, I wonder what Bongs over heads where including a slovenly middle mgt layer disconnected totally from the ethos of the founding principles, guessing fat, toxic and disengaged. My cousin married a Billabong marketing exec, what a twit she is, makes you wonder. Momentum is an amazing thing in business positive or negative. Soon as you start laying people off because mgt can't get the hook in its pretty much over after the 4th or 5th tranche of sackings, the company become a hollowed out brittle shell and like a team coming last nobody decent wants to head there. Billabong don't seem to have a plan even a shit plan.