MOSS ADAMS: Webinar 12/2 on internal controls to increase the value of your business.
AGENDA: 12/30 deadline to pre-register for Jan. 5-6 Long Beach show.
CIT TRADE FINANCE: Middle-market retailers cautiously optimistic for holiday.
Details on Industry Insight.
Like so many others in the action sports industry, the Active story is a tale of entrepreneurs building a business from scratch by following their passion. Shane's father, John, a former retail executive, started Active in Chino in 1989 with one store. John and Shane, then 16, were the only two employees; John worked days and Shane worked nights. They split the weekends. They soon opened a second store with a partner, who Shane was able to buy out by using a settlement he received from an auto accident. At 17, Shane was an owner of the business.
Back then, no surf industry sales reps would travel inland, beyond the 5 Freeway, Shane said. In 1991, Bob Hurley, then at Billabong, was the first industry leader to return Active's phone call. "To this day, Hurley is our best partner," Shane said.
Next year, Active will have been in business 20 years and by then expects to operate 30 stores. Its e-commerce website gets 100,000 to 140,000 unique visitors a day and is a big growth driver for the company.
Here are some other interesting details from our talk.
Growing pains: Previously, Active had opened stores slowly. In the last two years, however, Active has roughly doubled its store count. It also moved into a 100,000 square foot warehouse, right, in Mira Loma and invested heavily in upgrading its website.
Managing all those changes has been tough, Shane said.
"We bit off more than we can chew," Shane said. The challenges have bonded the top management team and the group has learned to be better businessmen, he said.
"It's the tightest ship we've ever run," said Bobby Goodwin, left, Active's purchasing and marketing director.
Cash flow: The biggest challenge has been cash flow because of all the recent investments the company has made. There are no deep-pocket investors behind the scenes. Shane and John are the sole owners and are using profits and a line of credit to fund the investments.
"Everything is going back into the company," Shane said. "Nobody is getting rich here."
Active beefed up its financial team to help with the growing complexity of the business and now has two CPAs on staff. "We've become smarter with financial planning," Shane said.
Though the economy is tough, Active did not want to pull back on its store openings - especially since its "two most exciting stores" are opening in the next six months: downtown San Diego and downtown Huntington Beach.
First quarter results: Retail stores were flat to down a bit. Online sales grew in the strong double digits compared to the same period last year. Overall company revenue grew.
SIMA Award: Shane said he wasn't going to go to the award ceremony in Cabo because he never thought Active would win. He thought it was a nice gesture to be nominated, but since Active is based on a skate model, he told his team there's no way Active would win an award from the surf industry. "We love surfing, but our foundation is skateboarding," he said.
Active ended up winning, and Shane is glad he and his team were there.
He believes there's a shift going on the industry, given that younger brands such as RVCA and Insight, in addition to Active, won awards that night.
"It shows there's something's going on," he said. "There's a younger, different influence, not so traditional. It's cool to see."
Active's secret: I asked Shane why he thought Active has been successful. The main thing, Shane said, is Active worries about itself instead of worrying about the competition. "We try to be very pure. We know who we are, and what we want to achieve. ... We can't control what the competition does."
Active's merchandising strategy has also helped, Shane believes. "We are very nimble. We change brands quickly. Only Stüssy, Billabong and Bob Hurley (at Billabong and then Hurley) have been there the whole time."
Shane notices that some shops have carried the same brands for 20 or 30 years. Active tries to change with the times and continually brings in fresh brands.
"Our mentality is let the best brand man/best brand win," he said. "We allow them to produce the best stuff and win the sales floor."
Going public? I asked Shane if Active would ever go public. He said they are leaving that option open, especially if Active takes on a financial partner who wants to explore that strategy. "I hope we make the right decision to benefit the people who built Active," Shane said.