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HOW GLOBE MANAGED TO TURN THE TIDE
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SOURCE Interview with Matt Hill, Globe International Limited Chief Executive Officer on the company’s FY2010 results
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“It’s actually been fun going back to basics, almost like a start up with all the right priorities getting attention: stringent financial controls, product driving the company and brand identity with some of the best creative marketing in the industry to represent that branded identity.”

 

This year’s closing at a profit of $1.3 million represents a major turnaround from last financial year’s losses of $8.9 million for Globe. What were some of the main factors that enabled you to change the tide?

We really took ourselves back to basics and analyzed where and how we spent money.  While partially we had to make some cuts to deal with the global economy we also took advantage of the situation to better structure the company for a more focused branded business, and to make sure we were spending money in the most sensible and supportive ways for our brands.
Today despite the tough markets we operate in, our brands are actually doing better product and marketing than I can remember for a very very long time.
It’s exciting to see such energy and great creative output from all our key guys generating some of the best footwear, apparel and skate products we have ever produced.

Another major achievement is Globe’s result of $14.9m of cash and no debt at the end of the financial year. How was this possible despite the current economic climate?

I’m proud to say that we saw the economic downturn and the potential severity of it earlier on than many of our competitors.
We moved to get out of onerous contractual commitments in the form of long term leases etc and also turned inventory into a cash at a time that the market still permitted us to do this without major costs, discounting or margin degradation.
While at that time we only had modest debt we made a concerted effort to become completely debt free and self funded. As it turned out when the credit crunch came, this really worked to our favor. 
Finally, simply making the business more profitable helps the most!  As an efficient wholesale business, when we are making solid profits our business is a cash generating business as we are not weighed down with capital expenditure demands such as retail fit outs, or major investments. As such, we accumulate solid cash reserves relatively rapidly.  It has always been one of the fundamental strengths of our business, one that in times of economic prosperity is not always appreciated. However, we are now applauded for our zero net debt position and strong cash reserves. 
It’s gratifying to have this recognized as we have always thought it is the basic of a good quality business and also positions us well for future brand investment or acquisitions whenever the need arises.

 

Speaking of the economy; how much of the difficulty Globe was facing do you attribute to “big picture” economics, how much to internal reasons?

Look just about no one escaped the “big picture” downturn no matter what the industry or location! However, in some cases we were not doing our best product and our marketing was not as creative or as well integrated into the product and sales mechanisms as it could have been.
Thus the tougher conditions have forced us to demand way more from our key brands and for everything we do to have a real purpose in the marketplace – there’s no room left for random fodder in branded product anymore.
It’s actually been fun going back to basics, almost like a start up with all the right priorities getting attention: stringent financial controls, product driving the company and brand identity with some of the best creative marketing in the industry to represent that branded identity.
Also, right now I think operating a business in the tougher conditions is like physical training at high altitudes and when the market improves or we come down to sea level we will be a stronger and more experienced company for having navigated through the whole ordeal!

 

What was the reason for discontinuing Globe’s Australian retail business? 

Retail for the company in any major form has never been a strategy I have been fond of.  For us, we like being in wholesale business with a solid efficient and streamlined operational business.  We have brands like Globe, Enjoi and Cliché that are nowhere near their potential within our own distribution channels. I’d rather work with our existing retailers to build those brands, grow sales and focus on what each of us does well respectively.
With regard to the aussie retail business specifically, this has been a plan since we disposed of certain business divisions a couple of years back with a strategic 10 year view of the business.  We had always wanted to wind down the retail operations but there was a natural wind down of that over a year or two.  The last financial year was the mop up of those activities.
Now we are left with some key flagship stores in key markets like the Globe stores in Hossegor, Torquay and the Gold Coast which are designed more to showcase the full range and breadth of the Globe brand in footwear, apparel and cruiser boards.  In addition, the stores help support Dwindle brands Enjoi, Cliché, Tensor, Almost, Darkstar and Blind in those markets as well as third party brands we distribute in Australia like Flip and Girl/Chocolate.

 

5. A) What are your near-future plans in terms of Globe’s international operations (structural; distribution, etc.?

We are well set now with our three major operational bases – Europe, Australasia and North America.  In each base we have great teams who are focused on getting our Globe and Dwindle brands out to a wider market as appropriate. I don’t anticipate many changes in that infrastructure in the medium to long term.
We operate in key direct markets and have a network of great third party distributors around the World.  In addition, there are some key markets such as South America and Asia where we can achieve further growth with good sales focus.
Our brands are multifaceted and so have multiple distribution opportunities. We do aim to sell to a wide range of distribution channels as appropriate for the position of each brand. This means once we commit a brand to a retail partner or distribution channel to get growth we do not necessarily have to move a brand out of the existing channel.
We are also always looking at new brands and gaps in the market we might fill.  However, these decisions must happen organically. In my experience when you force them for the sake of growth only, they generally fail. A new brand or acquisition has to make instinctive sense and the timing has to be right. 
New brand launches, product category expansions, or acquisitions can be great vehicles for a company when done for the right reasons, not to satisfy some arbitrary growth goal.  If the components felt right all of these are possible for us, and we are in a strong financial position to pursue such avenues when the timing is right.

 

With Dwindle, you are in possession of many proprietary, highly exclusive technologies that are pushing the boundaries of how skateboard equipment performs (wood laminates, wheels, trucks, etc.). Is this a major factor for Globe’s future position in the skate business?

With Dwindle we have always aspired to be a great technology developer, and then to offer technologies at the most competitive prices for end customers and best margins for our retailers.
Over the past few years we have been super successful in this venture and continue to lead the market with all our brands having great proprietary technologies at different pricepoints and for different functions. Almost’s Uber and double impact boards, Cliché’s keystone program and Darkstar Armorlite are all good examples of where this has worked extremely well for us.
We are using all this know how within the Globe skate program as well but in ways relevant for a cruiser board program.  Nonetheless, our state of the art manufacturing facility in China, our R&D processes and knowledge base enable us to bring great technologies and product innovation to cruisers at a better quality and pricing combo than any of our competitors.
Basically the same philosophy that is ingrained in our skate hardgoods programs has been applied to our Globe cruiser products.  It is a real advantage and why we have already taken a leading position in this growing market.  In the end great product makes its mark for a brand and our cruiser boards are hands down the best program in this category from a commercial point of view for a retailer, and first rate product for the end consumer.

 

And finally, what can European riders and retailers expect from Globe in the future?

The Globe brand is having a sales resurgence in Europe.  Our footwear design has been well adjusted to suit the European markets needs, and new management changes in Europe with Philippe Clarisse taking over have given a boost to sales.
It is also very beneficial that our global product manager for Globe, Matt Wong had many years experience in Europe and so has a good empathy for the European market – something that is often not the case with US or Australian boardsports companies selling into Europe.
Apparel in the European division has always been strong for us for Globe and continues to be a standout performer for the division.  New growth from the cruiser skateboard program is expected as well.
The product is the best quality, best priced cruiser boards on the market and currently we are having great success with sell through from any of our retailers who are stocking the program.  We’re very excited about the total package and how the branded message all ties together now.
Also, as a company we had a relatively early presence in the EU and have always tried to listen to the independent needs of the market and cater to those needs.
I think this continues to give us a competitive advantage and genuine place in the EU boardsports market which hopefully our riders, customers and retailers can see and appreciate.

 

What is some of your advice to retailers and companies for dealing with adverse economic conditions?

Go back to basics and focus on why you started your business and the priorities and goals that were important then.
When the market it is tough you need simple and focused goals but you also need to enjoy what you are doing for the task itself.  We could be stuck in these uncertain times for a while, and if you’re not enjoying the business for what it is, then you might as well find something else to do.  Life’s too short to spin your wheels on something you don’t get fundamental enjoyment and satisfaction from.
Also, within controlled parameters take some chances and keep the challenges and activities engaging. Most of us started our businesses as risk takers and entrepreneurs.  Its what drives the excitement of the boardpsorts industry.
However, as we get more experienced and learn some lessons we lose some of that naivety that drives creativity and innovation.
As the Chinese say, “Go straight to the heart of danger, and there you will find safety”: we start off in business knowing that instinctively but sometimes we lose sight of that concept as the World gets more complex and convoluted!