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Toby Bost, the CEO of the La Jolla Group and O'Neill Clothing, has told me several times in the past year that he foresaw a lot of opportunities for companies with strong balance sheets in the recession.
Now I know what he means.
The company didn't waste any time picking up respected designers Johnny Monson and Chris Boland for its Lost Clothing brand after Johnny and Chris's arrangement with Allyance fell apart. About the same time, Toby hired away Quiksilver Americas CFO Bill Bussiere to become President and CFO of La Jolla. Bill brings expertise in acquisitions, in banking relationships and in other financial operations to the company.
That's not to say the La Jolla Group isn't watching its payroll closely like every other company in America. La Jolla has eliminated a few positions over the last quarter, Toby said. But it is also investing in some strategic moves.
"In spite of the market downturn, we remain opportunistic and have invested in a few key human talents that will contribute to our long term growth plans and assist us with managing through the recession," he told me yesterday.
At Surf Expo, Toby and I also talked about a new program O'Neill Clothing is offering retailers. Called "First in," the program offers retailers the highest margins on O'Neill's best products.
"Our message to retailers is, ‘We have a great brand, and we want you to be profitable selling it,' " he said.
For example, on its new Hyperfreak boardshort, O'Neill is selling it to retailers for $30, and retailers in turn sell it to consumers for $75. So retailers make $45 on the transaction.
Hyperfreak, the evolution of O'Neill's successful Superfreak boardshort, is also being heavily marketed around the world.
Typically, most goods have a markup at retail in the low 50s. O'Neill is offering 55 percent to 60 percent on more than 20 of its key products, Toby said.
To achieve this, O'Neill has gone to its manufacturers to rework its cost structure to make the items more profitable.
Toby and I talked at Surf Expo in a rented ready-made booth O'Neill was using for the show. O'Neill's regular booth was in crates at the O'Neill warehouse in Irvine.
By going with ready-made booths, Toby said the company had cut its tradeshow budget for January in half.
He said the booth was about the same size, but had tables and chairs in a common area instead of individual work areas.
"The retailer gets it," he said. "They are here to look at product, not look at our trade show booth."
Toby said O'Neill is determined to break the clothing as commodities cycle and create premiere products as a point of difference.
"We expect the strategy of focusing on superior products will assist with offsetting the market behavior of commoditizing everything and putting it on sale," he said.
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