54.7 F
Laguna Hills
Tuesday, Mar 19, 2024
-Advertisement-

Billabong Strikes Deal for Rvca, Avoids Bidding War for Retailer

What a week for Irvine’s Billabong USA: the clothing maker snatched up the county’s top upstart clothing brand and appears to have prevailed in a short-lived battle to buy a coveted Canadian retailer.

Billabong, the U.S. arm of Australia’s Billabong International Ltd., said last week it’s buying Costa Mesa-based Rvca Clothing in a deal analysts estimate at about $30 million.

The move puts the action sports industry’s top buzz brand into Billabong’s fold. Rvca is part of a new breed of clothing makers that draw inspiration from surfing and skateboarding as well as fashion, art, music and even mixed martial arts.

“It’s sort of a trophy acquisition,” said Jeff Van Sinderen, an analyst with B. Riley & Co. who covers action sports retailers such as Zumiez Inc. and Pacific Sunwear of California Inc. “That’s a brand a lot of other companies would like to own.”

Billabong, which sells clothes inspired by surfing, skateboarding and snowboarding, gets “an authentic brand that really reaches youth culture,” Van Sinderen said.

Last week the company also saw a path cleared to buy Canada’s West 49 for about $85 million after fending off a potential bidding war with Everett, Wash.-based Zumiez.

Billabong’s buy of West 49, which runs 138 Canadian stores, is set to close in September.

Rvca and West 49 will fall under Paul Naude, president of Billabong USA and a Billabong International director. Naude was not available for comment last week.

The West 49 deal continues a push into retail by Billabong and stands to more than double its North American stores to 230. Worldwide, Billabong is set to have some 500 stores with the deal.

“We’ve certainly been looking to add business on,” Derek O’Neill, chief executive of Billabong International, told analysts on a recent conference call. “This is no doubt a large one.”

In May, Billabong bought Torrance-based Becker Surf & Sport, which runs four Orange County stores.

In November, it bought San Clemente’s Swell.com, an online retailer. The company also runs stores under the Beach Works and Honolua Surf Co. names from earlier acquisitions.

“Billabong is a strong brand,” Van Sinderen said. “This is their time to make acquisitions and grow.”

The company has yearly sales of $1.4 billion with Billabong USA making up about 45%. It’s the second largest maker of action sports clothes after Huntington Beach-based Quiksilver Inc.

Billabong sells clothes under its own name as well as Element, VonZipper and other brands.

The retail expansion is “really an opportunity to increase the availability of our brand,” O’Neill said on the conference call. “We obviously want to get as close to the consumer wherever we can.”

West 49 runs stores under its own name as well D-Tox, Off the Wall and Amnesia/ Arsenic. It also runs five Billabong stores in Canada.

Billabong clothes make up about 15% of West 49’s merchandise, according to O’Neill. The company plans to up that but keep clothes from other brands, as it has with prior retail acquisitions.

The goal is to get Billabong products to make up close to 45% of the mix at West 49 stores, according to O’Neill.

“Somewhere around there wouldn’t be a far-off balance,” he said.

Canada, where snowboarding is big and skateboarding has taken off, is a hot market for Billabong and others.

“It’s a strong territory for us,” O’Neill said. “Sales in Canada have been in excess of 10% of North American sales,” putting them “well into tens of millions.”

Fine Line

As Billabong becomes as much a retailer as a clothing maker, the company has to walk a fine line with other store operators and even competitors, whose clothes it sells at its stores.

“We would like to think we can coexist quite well and try to showcase our products. But we will be leaving them multibranded,” O’Neill said.

Retail now makes up 30% of Billabong’s yearly revenue.

“Having retail is a way to diversify their business,” Van Sinderen said. “It gives them a better sense of what’s going on in the retail business. That’s a benefit to their wholesale business.”

Van Sinderen said he doesn’t see Billabong’s retail expansion jeopardizing its clothing sales at Anaheim-based Pacific Sunwear, the largest seller of action sports clothes, or at Zumiez.

Zumiez is set to pursue an already detailed Canadian expansion on its own. The company is set to open its first Canadian store in Vancouver, British Columbia, next year.

For Billabong, buying West 49 made more sense then opening Canadian stores on its own, Van Sinderen said.

“You don’t have to go through the learning curve, that trial and error process,” he said.

Gomez is a former Business Journal editor and freelance writer based in Long Beach.

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-
-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-