California Apparel News

Orange County is home to more than a dozen action-sports companies that distribute their logo’d apparel around the globe. Because of its sunny locale, nestled between Southern California’s coastline and the San Bernardino Mountains, the county is a prime spot for getting a true glimpse of the board-sports lifestyle.

Board sports—the group label for surf-, skate- and snowboarding—appears to be on a strong growth streak with participation by more than 22 million Americans, according to Board-Trac, a Trabuco Canyon, Calif.-based market-research company that tracks the lifestyles and purchasing habits of young people between the ages of 9 and 24 who participate in or are influenced by board sports.

Board sports represented $9.4 billion in annual revenue for 2002, with 70 percent of that coming from sales of clothes, shoes and accessories.

Tony Cherbak, a partner with Deloitte Touche Consumer Group in Costa Mesa, Calif., puts the revenue generated by Orange County’s board-sports industry somewhere between $1.8 billion and $2.2 billion.

“Orange County is the surf capital of the world—it is where a lot of companies have grown and where they still reside,” said Cherbak. “If you look back over the last 10 years and see how companies like Quiksilver and Ocean Pacific dominated the market and then the growth of the market with companies like Volcom, it’s pretty impressive. And there’s no reason to believe that’s not going to continue.”

According to the most recent Board-Trac study, there are almost 7 million snowboarder participants, with the number of surfers and body-boarders declining from 2.5 million in 2001 to 2.2 million in 2002.

The number of skateboarding participants has grown to more than 13 million—almost triple the amount of participants from a decade ago—and that number is expected to reach 15 million participants by 2005. More than 1,000 skate parks have been built in the United States between January 2001 and July 2002, and as many as 2,000 more may be built by 2004, according to the Skate Park Association of the USA.

Orange County is home to so many board-sports manufacturers that the region serves as an indicator for current trends in the market.

Debbie Harvey, director of merchandise buying at Cocoa Beach, Fla.-based Ron Jon Surf Shop, a specialty chain that carries men’s and women’s surf and skate apparel and accessories, said about 98 percent of the stores’ lines hail from Orange County or “in that vicinity.”

The company owns two stores in Florida, one in Long Beach Island, N.J., and one at the Block at Orange in Orange, Calif. Harvey said each store carries approximately 40-plus men’s labels (and about half that amount for women), with an even mix of well-known surf/skate brands and indie labels, such as Hurley, Volcom, Rusty, Lost, Emerica and World Industries.

“East Coast customers want to emulate West Coast lifestyle, and Orange County is the best place to find it,” said Harvey.

Despite the larger-than-life presence of action-sports manufacturers, such as Ocean Pacific, Billabong USA, Quiksilver and O’Neill, the county remains a burgeoning scene for indie labels.

In recent years, O.C. labels such as Costa Mesa-based Volcom, Irvine-based Element and Etnies have achieved higher sales growth while maintaining an indie feel.

Newport Beachbased Rvca, Irvinebased Ambiguous Industries and Ezekiel, Santa Ana-based L-R-G and Huntington Beachbased Split are just a few upstarts that may not be on par financially with those companies, but are steadfastly gaining notoriety with lines that mix West Coast actionsports lifestyle with urban flavor.

The fast-paced growth of the skate market prompted some surf-apparel makers to get in on the action: Huntington Beach-based Quiksilver purchased the Hawk skateboarding clothing line almost three years ago, Irvine-based Billabong USA purchased Element, and O’Neill picked up Lost Enterprises.

At the same time, some board-sports companies have crossed over to launch apparel lines. Globe USA, DC Shoes Inc. and Etnies, which entered the action-sports business as footwear makers, have created their own apparel collections geared toward the youth market.

Seemingly, action-sports manufacturers— especially those in the surf category— are beginning to feel the heat of competition, according to Marie Case, managing director at Board-Trac.

“Young people are not spending so much at specialty retailers—they’re buying more at off-price venues, such as Marshall’s and Ross,” she said.

Tim Harmon, president and chief merchandising manager at Anaheim-based Pacific Sunwear, said even though in December the retailer reported its highest compstore sales since 1997, the percentage of sales for the skate category is “beginning to taper off and the percentage of surf-apparel sales stabilize.”

Authenticity counts

Some Southern California board-sports manufacturers rely on the authenticity of their labels to market the brand, a ploy that can be especially appealing to athleticsportswear companies that want to gain entry to the surf and skate apparel markets.

Last year, footwear giant Nike entered the board-sports market with the purchase of Costa Mesa, Calif.-based Hurley International.

Owner Bob Hurley sold his $70 million company to the Beaverton, Ore.-based company to build the brand and expand internationally. Hurley remains president of his company, which now operates as a subsidiary of Nike.

For Nike, buying Hurley fits into the $9.5 billion athletic-shoe company’s plans to diversify into other brands and gain access to the board-sports market with an established, authentic brand.

Joani Komlos, spokesperson for Nike, said prior to the acquisition Nike was looking closely for an Orange County–based brand that is as like-minded as its customers.

“Hurley fit the criteria because it is entrenched into that core consumer and that core consumer’s lifestyle,” she said. “Hurley lives and breathes core board, surf and teen lifestyle.”

In recent months, Hurley has opened offices in Japan and Australia, said Komlos.

Hurley’s new footwear label hits retail stores at the end of this month.

For consumers, the definition of authenticity means small, undiscovered and indie.

Although it has seen considerable growth in recent years, Costa Mesa-based skate company Volcom said it managed to compete with the larger board-sports companies by keeping its focus on what it does best: produce cutting-edge styles and maintaining a do-it-yourself ethos.

“Instead of trying to compete with bigger companies, we just focused more on what we could do,” said Volcom founder and president Richard Woolcott. “When you’re a small indie label, you just look out for yourself and live within your means.”

Woolcott, who started the company in 1991 with a small loan that his father gave him, said his business’ growth rate is between 15 and 20 percent each year.

“We’re growing at a comfortable rate, we’re not forcing it,” said Woolcott, adding that he tries to maintain a passionate approach to business and unique marketing strategies.

Woolcott, who now splits his production between local contractors and offshore production facilities, points to a number of other indie labels that are eager to enter the marketplace with the same tenacity that helped fuel his company. One of his favorite upstarts is Grenade Glove, an urban line started by a group of snowboarders who live near Mammoth, Calif.

“Grenade Glove is produced by a group of talented snowboarders who make their own movies and have good athletes representing the line. It reminds me of what we were doing in the beginning,” said Woolcott.

Although smaller than Volcom, Irvine-based Ambiguous Industries is another label on the rise.

Founded by Frank Delgadillo in 1995, the company’s focus is specialty-store-oriented customers between the ages of 14 and 22, but its progressive line of T-shirts, denim, jackets and hats are worn by men of all ages, including members of the bands Black Eyed Peas and Papa Roach.

“We [offer] clothes kids wear because they understand our philosophy and the way we do things,” said Ambiguous’ vice president of merchandising, Rick Muller. “It’s always difficult to compete with the larger companies, but we find a way.”

With only 15 employees, the apparel maker considers itself an indie label, although it expanded its account base from 50 to 350 over the last six years. Along with domestic sales, the company also ships to Canada, South America and Asia.

Muller declined to give 2003 projections for the company, but industry sources put sales in the range of $2 million to $5 million.

Lost Enterprises is another label that is quickly gaining momentum in the industry. Lost’s super-edgy skate line was founded by Matt Biolos and Mike Reola, who expanded the company’s offerings to include casual sportswear. Between 1998 and 2002, the company’s sales increased from $6 million to almost $20 million.

Two years ago, the company signed a licensing agreement with O’Neill and currently has licensees and distributors in Canada, Europe, South Africa, South America and Japan. Additionally, its account base has grown from 250 to 350 since 1998.

“There’s a certain kid that goes for the brand that is not as well-known to others because he wants to separate himself from what his friends are wearing,” said Ron Jon’s Harvey. “But if you look at volume, the companies with wider distribution dominate the business.”

Much of the skate market’s growth has been influenced by the introduction of new brands within the segment that don’t exist in surf’s menu, said Pac Sun’s Harmon.

“There is an opportunity for a new brand to be introduced in surf business that has a unique fashion vision that would add incremental growth to the very developed surf base.”

Perhaps the most difficult aspect of the business for fledgling labels is not selling their product to consumers, but selling it to retailers, said Kevin Flanagan, group show director at Action Sports Retailer Trade Expo.

“We’re trying to create an environment in which new businesses can launch and develop successfully. In order for that to happen, we need retailers to give smaller, independent labels a chance. An example of that would be for retailers to earmark their open-to-buy dollars for new labels.”

Room to grow

For many of the larger players, focusing on brand growth is a top priority—but it still leaves room to expand into smaller segments of the board-sports market.

Footwear, which has long been on the product menu for many skate brands, is a relatively new category for surf companies. Many see it as a way to diversify their product offerings and offset seasonal buying trends.

Jason Bleick, vice president of design at Quiksilver, said the company is planning to launch a line of casual “lifestyle” footwear for Holiday 2003.

“There’s been a demand from retailers and the market, and we feel the timing is right,” he said.

Irvine-based Ocean Pacific Apparel Corp. returned to its roots last year by launching Classic Collection, which revived some of the label’s most popular styles from the ’70s and ’80s. This year, the company is looking to urban influences in surf and skate for its latest collection, Seven2, which combines West Coast lifestyle with fashion-forward trends.

The collection has engineered striped knits, fleece tops, pin-wale corduroy pants and novelty washed denim. With retail price points set between $40 and $50, the line will be sold exclusively at specialty retailers and selected department stores, said Alain Maizer, director of public relations.

Quiksilver is one of the industry’s giants, with sales growing 13.8 percent this year to $700 million. The company has built its reputation on the surf and beach lifestyle. But for Summer 2003, the company is fine-tuning looks that show less flesh and more personal style.

Quiksilver is getting ready to introduce vintage Western details to its Quik Jean line. Items in the line include woven shirts with pearl snaps and five-pocket corduroy and denim styles with vintage dye treatments. The company is debuting its new look during the Jan. 23–25 run of Action Sports Retailer Trade Expo in Long Beach, Calif. The company is also planning to incorporate a collection of athletic warm-up suits and khakis with special details and treatments for fall.

“Lately, there have been a lot of good influences coming from the street and getting translated into brand-new product,” said Quiksilver’s Bleick. “For Quiksilver it started years ago with surfing. Our roots are still in surfing, but it’s been important to integrate all board sports into the brand as much as possible.”