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Details on Industry Insight.
I met with Rip Curl USA CEO Kelly Gibson last week and had an informative talk about Rip Curl's new flagship store in downtown Huntington Beach, how the reinvention of Rip Curl in the U.S. is going and how Kelly has adjusted to the new job.
The Rip Curl store opened just over two weeks ago and is located downtown on Pacific Coast Highway in The Strand shopping center.
The store is 5,500 square feet, open and airy and filled with Rip Curl goods.
Since wetsuits are a critical piece of Rip Curl's brand, the store dedicates about 35 percent of the floor space to its wetsuit collection. There is an interactive touch screen video display where shoppers can learn about the technical features of each model. Consumers can then find the suit they are interested in on clearly labeled racks that organize the suits by styles.
The store also has a selection of 130 Rip Curl boards, which Kelly said the brand is selling only in its stores, not wholesaling.
The juniors section is large, with a discreet half wall that gives the area a boutique feel. Girls get their own dressing room and lounge area as well.
The guys and boys section displays the whole range of Rip Curl product, from a sampling of 30 styles of boardshorts on the wall, to walk shorts, sandals, hats and backpacks.
Ty Brown, Rip Curl's general manager of retail, and Marketing Director Dylan Slater said the company wanted to incorporate Rip Curl's 40 years of history while also speaking to a new, technical generation. The wet suit area uses lots of wood and has a rootsy vibe, the dressing room area is covered with collages that show historical and current images of Rip Curl, and some areas of the store use more metal fixtures and have a technical feel.
While the store is a great showcase for the Rip Curl brand, Kelly acknowledged it is controversial because of its location: one block from Huntington Surf & Sport and Jack's Surfboards.
As a result, HSS and Jack's no longer sell Rip Curl goods, he said.
Kelly said when he took the CEO job nearly 2 ½ years ago, he reviewed the lease and gave the situation a lot of thought. His job is to revamp the Rip Curl brand in the U.S., and to do this, he'll have to do some unconventional things, he said.
"I really believe this is the right thing for the brand even though it is controversial," he said. "We still have a good relationship with (Jack's and HSS) and we hope to sell them again. We do not plan to open a bunch of beach stores around core guys. But there is only one Huntington Beach. ... And we needed our footprint here, in the most visible area of the world. Consumers and retailers have a different and better understanding of Rip Curl when they leave this store. That's doing our job."
Kelly said he's told his staff to embrace the store and bring retailers to see it and the full Rip Curl line. "The retailers need confidence in Rip Curl. We can fill this whole store and we are proud of that."
Rip Curl is one of the top three brands in most territories around the world, but not in the U.S., Kelly said.
The company made many mistakes here, from a rotating cast of top management to trying to sell lines mostly designed in Australia that were either ahead or behind the trends here.
Kelly, formerly the president of O'Neill Clothing, took the CEO post at Rip Curl in October, 2006.
I asked Kelly what have been some of the biggest surprises so far, and what it was like to go from running a large company that was at the top of its game to Rip Curl's U.S. division, which was much smaller and struggling.
One of the biggest surprises was the lack of a senior management team, he said. Kelly said while he knew he would need to build a new product team, he has also rebuilt the whole backend of the operation.
Because Rip Curl in the U.S. does not have the volume to support many layers of management, Kelly has dug into details like never before, from reviewing expense ratios in the warehouse to hands-on training of young managers.
"It's been a challenge," he said. "I've had to reinvent myself, no doubt about it. ... "I haven't regretted my decision one day. I'm growing a lot."
The other surprise was the ease of working with Rip Curl's corporate headquarters in Australia. People told Kelly before he took the job that the company was hard to work with. He has found it to be just the opposite.
"I've had more autonomy in this job than any other," he said. "It's refreshing."
Kelly's also enjoyed working for a global company and learning about the international business and taking part in training sessions himself. He goes to Australia soon for three weeks of finance training, a leadership course and a meeting with his global counterparts.
"It's great to have those opportunities," he said.
Rip Curl has 16 stores in the U.S., and learning about the retail business is also new for Kelly. It's definitely an education in this challenging retail environment.
"It definitely helps me understand what our retailers are going through," he said. "Retail is beyond difficult right now."
Kelly knew there were two things he needed to change when he took the Rip Curl USA job: improving product and repairing relationships with retailers.
He hired Rick Petri and Mary Miller from O'Neill to head up men's and women's product. And while the Rip Curl apparel range is global, about 70 percent of the apparel line is now designed in Costa Mesa vs. 10 to 15 percent in the past. Previously, most of the design was done in Australia, where trends were either ahead or behind the U.S.
Rip Curl is working hard to repair relationships with retailers and continues to ask for more shelf space. Kelly thinks Rip Curl has a compelling case: it is not overdistributed, the brand is heavily marketed globally, the product has improved and the team has stabilized.
Kelly said they are getting "baby winds" and are opening a lot of accounts, but are not yet getting prime positions inside stores.
"We know it will take time, and we have to earn it," he said. "We didn't think it would happen in two years. While it's a huge challenge, we think we can get it to where it deserves to be. There's no reason it shouldn't."
Kelly said the short-term goal for the USA division is to run without investment from global headquarters.
"We are getting close," he said.
Kelly said every CEO is under a tremendous amount of pressure right now. Rip Curl, which had been building its staff, had to reduce headcount, he said, and is streamlining expenses.
Bright spots include wetsuits, particularly the E-3, and boardshorts and walk shorts for men. Juniors is also doing well - even with tough retail comps overall, juniors sales keep going up week over week, Kelly said, thanks to Mary Miller's inaugural spring line for Rip Curl. Dresses are particularly strong, he said.
For fall orders, the climate is tough, Kelly said. Rip Curl opened 100 new accounts in spring and 100 new accounts in fall, so new business is good. But comp business "is very difficult," he said. Rip Curl USA, working off a small base, is planning for growth this year but not at the double-digit rate it had planned previously.
Because the number of retailers on credit hold is at historical highs, Rip Curl is trying to partner with storeowners when it can and handle payment issues on a case-by-case basis, he said.
Rip Curl USA, as a subsidiary of a large global company that is approaching $500 million (Australian) in annual revenue, has the support to weather the storm, he said.
"We are a large company, we are privately held, with the founders still owning about 95 percent of the company," Kelly said. "We are not leveraged. We are very profitable globally. Now, we've been hit like everybody else, but we have no debt. We are in great shape."
Kelly said he encourages his staff to look at the glass as half full: Rip Curl will be standing after the recession shakes out some brands and will be able to offer retailers a brand that is not overdistributed in the U.S. yet has all the marketing and support of a larger company.
When all is said and done, Kelly said, "We could be the new 40 year old brand."