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Industry Insight

MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.

Details on Industry Insight.

Tiffany Montgomery
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Billabong acquires RVCA

By Tiffany Montgomery
July 11, 2010 4:24 PM

Billabong International Limited continued its acquisition streak Sunday by announcing it has a conditional agreement to buy RVCA.

Terms of the deal were not disclosed because the purchase price is not material to Billabong's results.

Billabong did say RVCA is expected to contribute 2% to Billabong group revenues in the 2010/2011 fiscal year and be neutral to earnings. In the 2008/2009 fiscal year, Billabong recorded $1.67 billion in revenue.

RVCA is relevant in several categories including skate, surf, fashion and Mixed Martial Arts. It also has deep roots in art and music, and has entered the female, New York fashion world with its collection by model-turned-designer Erin Wasson.

RETNA, Pat TenoreIt sells everywhere from fashion boutiques to surf shops, skate shops to Nordstrom. It has also become popular at PacSun stores.

RVCA, founded in 2001, is considered one of the strongest apparel brands in the market with the potential to someday make the leap to the top-volume tier currently dominated by Quiksilver, Billabong, Volcom, Hurley and O’Neill.

(The artist RETNA with Tenore at the New Image Art Gallery.)

RVCA’s product is in strong demand, and the company needed more financial resources to meet it, I am told.

For Billabong, it continues the company’s strategy of acquiring top brands in different categories. (See timeline below of Billabong’s acquisitions.)

It comes on the heels of the news that Billabong is bidding for Canadian mall retailer West 49, as is Zumiez. Billabong also recently acquired five Becker Surf stores and Becker's online operation, and online retailer Swell.com.

(Above: Pat Tenore at Agenda last year.)

RVCA in board stores

Here is some RVCA information from the ActionWatch Retail Panel courtesy of Cary Allington. The panel consists of approximately 250 boardsport retailers.

- RVCA is the sixth-largest apparel brand in the ActionWatch Retail Panel and is especially strong in the Ts, wovens, jeans and pants categories. It is also stronger in men's products than in women's.

- RVCA's distribution penetration in the panel is similar to all the other top apparel brands other than Volcom (most top apparel brands are in the 50%-60%-penetration range while Volcom is nearly 80%).

- The ActionWatch same-store panel shows RVCA holding its market share with essentially flat sales (Jan-May 2010 compared with the same period last year). However, sales are up for its male products. The brand has had a huge sales and market share increase in the pants category (non-denim), based largely on strong sales of the Romero series pants.

Helping the backend

Paul Naude, Michael TomsonIn a statement, Billabong North America President Paul Naude said RVCA has done a great job of building its brand and will now benefit from Billabong’s global infrastructure.

“There comes a time in the development of a young brand when the administrative side of doing business can start to consume resources that are better applied to the creative development of the brand.

“I think this is one of the strengths of the Billabong group. We have capabilities in areas including sourcing and the management of the supply chain, distribution and general financing and these types of support structures allow our brands to focus on product and marketing,” Naude said in the release.

(Above: A busy Paul Naude talking with Michael Tomson Friday night at the Waterman's Ball. Paul is the Chairman of the SIMA Environmental Fund Board of Directors and a passionate advocate for environmental protection.)

Billabong’s philosophy of letting its acquired brands keep their identity and operate fairly independently appealed to RVCA founder Pat Tenore.

“One of the key things about Billabong is its respect for the creative independence of each of its brands and that level of flexibility will allow RVCA to maintain its identity while benefiting from the support of the wider Billabong group,” Tenore said in a statement.

See Page 2 for a timeline of Billabong's acquisitions


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