At its annual meeting, Billabong’s new CEO Neil Fiske outlined a seven-point turnaround plan, which includes rebuilding the company’s global brands and sorting emerging brands, finetuning merchandising strategies with fewer better styles, and integrating marketing strategies for each region.
Fiske, who is credited with turning around Eddie Bauer, said Bilabong had become “ enormously complex and diversified.”
"We have been trying to do too many things – and none of them particularly well," said Fiske. "Building global brands takes one skill set. Running regional multi-brand retail is something totally different. And being a pure play multi-brand e-commerce business is another thing altogether. Then multiply that complexity by a regionalized organization structure with independent decision making and different operating infrastructures. As complexity grew, we lost focus. We confused the organization. As someone said to me on my first global tour of the Company: “We need clarity. Are we a retail company with brands… or are we brands with retail?”
He noted that the Billabong brand is still the number one brand in specialty surf shops in both Australia and the US. It has over 90 percent awareness and high regard in the target demographic.
"I’m only twelve weeks into this role," said Fiske. "I’ve had the chance to spend time in our operations in Europe, the Americas and Australia. I’ve spent time in our stores and talked to our core customers, key accounts, and sales reps. I’ve looked at the consumer research. At the financials. At where we win and where we lose. And I can tell you this – I am more convinced than ever of the upside ahead of us and the power of our brands.
"It’s exciting to be here and see the potential right in front of us. It’s tangible. It’s real. But to get it, we’re going to have to make bold moves. Get back to the core. Chop the unprofitable branches off the tree. Focus on what we are best at doing. Create a brand renaissance."
However, the company would need to make “ bold moves” to take advantage of its potential.
“Our mantra is fewer, bigger, better businesses, fewer bigger better brands and fewer bigger better styles.”
“This philosophy will pervade everything we do,” he said.
He noted that Billabong has several brands but "we treat them all pretty much the same. Each brand, for example, gets a comparable level of marketing – regardless of where it is in its lifecycle or growth potential. RVCA is showing tremendous growth. But we’re giving it the same level of marketing as more mature brands – instead of putting our foot on the gas pedal and investing to accelerate growth and market share.
As a result, the company has sorted the portfolio into two groups – “the big three” of Billabong, Element, and RVCA and smaller 'emerging brands.'
"With the appropriate focus and resourcing, the big three have the potential to grow consistently and deliver strong profitability. It’s a great portfolio: Billabong is a surfing icon and owns the authentic surf lifestyle; Element is the biggest authentic skate apparel brand in the world and connects us to the street culture; and RVCA is a totally unique blend of multi-sport, culture, and art.
"In the emerging brand portfolio, we have some gems like Von Zipper that have the potential to become much bigger lifestyle brands. We will keep the ones that have growth and category leadership potential and evaluate our options for the others. You will see us tailor specific strategies to each brand based on their size, potential, life cycle, and role in the portfolio. You’ll also see us push the uniqueness of each brand by fostering creative and cultural environments with distinctive brand DNA and vivid personalities.
That DNA is still drawn from the founders themselves. We are fortunate to have four founders now totally re-energized in their brands: Gordon Merchant for Billabong, Johnny Schillereff at Element, Greg Tomlinson at Von Zipper, and Pat Tenore at RVCA. Maximizing the power and creativity of these founders is fundamental to our brand renaissance."
Other parts of the turnaround include building new channels to market and significantly increase direct- to-consumer sales to 30 percent of total sales within the next five years. He also flagged further restructuring of Billabongs supply chain, moving to fewer, bigger suppliers and gradually diversifying out of China.
Billabong also needed to realign the organisation to the new strategy by developing a global brand structure, better merchandising, design and marketing teams and build global scale and capability in finance, supply chain, IT, and direct to consumer platforms.
Fiske finally said Billabong needed to look for further cost reductions to improve profits and fund a marketing war chest.
Chairman Ian Pollard said sales so far this financial year were "steady or slightly improving" in most markets except the Americas, which had been hit by problems at US retailer West 49, management disruption and "its customer confidence as we negotiated our way through the difficult period in mid-2013."
He added, "Whilst the November result for the Americas was much better, the region was $9 million down in EBITDA for the first four months before significant items compared to the prior year. Collectively the rest of the group is ahead of the prior year on a comparable basis as we enter our most important trading period. I am confident though, that having withstood challenges few other brands could have, ours will flourish once they receive our full attention and appropriate investment and will in due course provide us a more appropriate return on your investment than they
A transcript of the full annual meeting is here.