Fox Racing owns the dirt tracks. Now it’s setting its sights on the red carpet.
The Irvine-based motocross and mountain bike gear and apparel retailer, which is quickly approaching $350 million in sales annually, is looking to further expand its mountain bike offerings and enter new international markets.
It also plans to add “media company” to its brand.
Fox currently has a full-length feature film in production, set for a release in the first quarter of 2023, Chief Executive Jeffrey McGuane tells the Business Journal.
Details on the movie are still being kept under wraps, though Fox previously partnered with Canadian mountain bike media company Anthill Films Inc. to produce “Long Live Chainsaw,” a film about former Fox mountain bike athlete Stevie Smith. The movie, released last year, is available to view on Amazon Prime Video.
“Two years ago, we would have never invested in the production of a full-length feature because we didn’t think of ourselves as a media and entertainment brand,” McGuane said. “[But] as we’ve elevated the way we thought about [Fox], it’s led to these types of ventures.”
Vista Umbrella
The new ventures come under a new ownership structure for Fox Racing, which was founded in 1974 and previously known as Fox Head. The company moved its headquarters from Northern California to Irvine in 2016.
Last month saw Anoka, Minn.-based outdoor and sports products conglomerate Vista Outdoor Inc. (NYSE: VSTO) complete its $540 million buy of Fox from Palo Alto-based private equity firm Altamont Capital Partners, which bought a majority stake in the business in 2014.
The deal, first announced in early July, marked the 40th brand to join Vista, which was valued at around $1.6 billion as of last week.
Other companies under Vista’s belt include Petaluma-based hydration product manufacturer CamelBak, Overland Park, Kan.-based binoculars maker Bushnell and Richmond, Ind.-based gun accessory manufacturer Champion Target. Vista recently added Bozeman, Mont.-based fishing gear company Simms Fishing in a $193 million deal, raising its portfolio count to 41 brands.
Fox is Vista’s largest acquisition to date, and it should be the biggest revenue producer for the parent company. Vista is expected to generate about $350 million this year in net sales and $55 million in adjusted earnings before interest, taxes, depreciation and amortization.
Pooled Resources
“As a publicly traded company, Vista really gives us a long-term home for the brand’s continuous and sustainable investment and growth,” McGuane said.
“As a $350 million business, you can’t necessarily invest in those types of resources internally,” said McGuane, citing better asset and factory management efforts, as well as environmental, social and governance initiatives.
Vista’s myriad of brands also provides a valuable network for Fox.
“It really helps us collaborate and cooperate with other great brands and brand leaders to help us accelerate our plans that continue to create more inclusive workplaces, address sustainability and environmental issues by pooling our resources and working together to advance our agenda together.”
Expansion Plans
Fox’s growth rate and expansion strategies were of particular interest to Vista, McGuane said.
The company grew net sales by a compound annual growth rate of about 20% from calendar year 2019 to 2021 thanks in part to consumer changing tends during the pandemic (see story, this page). This calendar year, Fox expects to grow in excess of 20%.
The company’s expansion plans span multiple channels and include increasing its cycling offerings with new gear and products.
“There’s a lot of product initiatives that are also driving our overall growth and expansion,” McGuane said.
“We’re relatively young in addressing that market opportunity, so we’re going to continue to expand our product offer and assortments within the category of cycling, to complement our power sports and motorcycles segments.”
Fox is also looking to sell its products in more countries.
Over 40% of Fox’s business comes from outside the U.S., according to McGuane. The company sells directly to consumers in Europe and Canada and aims to introduce its products in the Asia Pacific region and other international markets.
HQ Revamp
Fox has no plans to leave Orange County under the new ownership.
“We’re continuing to invest to make Fox a great place to work,” McGuane said.
The company recently invested $1.5 million to enhance its 82,000-square-foot Irvine office campus near The District shopping center in Tustin.
Half of the funds went to renovations for the campus, such as improvements to its on-site motorcycle track and bicycle pump track, which will be open to the public on special occasions.
The other half of the funds went to a new retail concept featuring a museum on Fox’s history on the premises.
The company employs nearly 420 people, including an estimated 110 in Irvine.
Performance Focus
McGuane, who became Fox’s CEO in 2019, shifted the company’s focus from lifestyle apparel to performance-based products—a process he calls “brand clarification.”
“In the past, I would say Fox before had a lot of non-performance apparel,” he said. Lately, “we’ve really invested in creating real performance features and versatility within the products that potentially you could ride on and off the bike. Or, we leveraged our knowledge to actually elevate the lifestyle apparel, so that they had performance elements to them.”
Fox’s motocross unit, which makes helmets, gloves, pants and guards, currently makes up about 44% of the company’s sales. Mountain bike products, such as helmets, shorts and jerseys, represented another 38% of its business, while the company’s apparel lines, a mix of casual, performance and utility clothes, was the remaining 18%.
New Tracks
The company has been busy inking partnerships. Fox recently signed an agreement with Broomfield, Colo.-based Vail Resorts, one of the most recognized ski resorts in the U.S., to be the lead brand on mountain across its bike parks.
Other partnerships include Austria-based Bikepark Leogang, as well as Palo Alto-based Pala Band of Mission Indians to create a motocross track experience in San Diego that, according to McGuane, will be “the most elevated riding experience for the Southern California motocross community.”
The company this year sponsored the Outdoor National Motocross, which counts an attendance of over 100,000, hosting the first and final race of the competition.
‘Disruptive’ Thinking
Fox, as with many companies, underwent a change in team dynamic during the pandemic.
Traditionally, “once you get into a more of a sustainable, consistent way of operating, you don’t normally challenge each other as much,” McGuane said. “But that crisis moment created a comfort level with an elevated level of candor for continuous improvement.”
Now, “we challenge each other to think to the future—and it’s trained our teams to really be more outspoken and value more disruptive types of thinking.”
The result is that the company’s been able to sell its products more consistently throughout the year, rather than through its traditional seasonal approach, he said.
Outdoor Craze
The pandemic stirred an uptick in outdoor recreation, and Fox Racing’s new parent company has taken notice.
Vista Outdoor Inc. announced plans in May to separate its outdoor and sporting goods businesses into two stand-alone public companies. That split should be completed next year.
Last year, Vista’s stand-alone outdoor unit, which will include Fox Racing, was responsible for about $1.3 billion of the company’s revenue of $3 billion.
The outdoor industry has seen explosive growth since the pandemic. The highest participation for outdoor recreation on record was in 2020, with 53% of Americans ages 6 and up RV camping, hiking, fishing or doing similar activities at least once, according to trade organization Outdoor Industry Association.
Fox CEO Jeffrey McGuane predicts that growth in the outdoor segment will remain strong, especially in the motocross and mountain bike segments, even as the pandemic winds down.
“The trends are sticky,” he said.
Fox expects the mountain bike market to grow at a “solid double-digit rate” for the next two years, while the motocross market will see high single-digit growth. Demand for e-bikes has also begun to grow at projected a double-digit rate over the next decade as consumers adopt them as means for commuting, according to McGuane.
Ski resorts are converting their grounds into summer biking trails, which also presents an opportunity for Fox, McGuane said.
“We’re really bullish about cycling.”
—Kaitlin Aquino
