California Apparel News

SAN JOSE DEL CABO, Mexico—For many in the booming surf industry, bigger is not always better. While many apparel brands search for ways to grow their businesses, some surfwear makers look for means to control their growth.

That was the theme tackled by approximately 400 representatives from surf companies, law firms, investment banks, stores and other groups at the eighth Surf Summit conference organized by the Surf Industry Manufacturers Association (SIMA).

Worried that expansion and mainstream acceptance will compromise their sun-drenched, salt-water culture, which stresses authenticity, attendees gathered at the Royal Solaris Los Cabos May 12–15 to discuss how to preserve the environment, brands and surf culture.

Attendance at Surf Summit grew 21 percent over last year, although missing were the top brass from surf brand leaders such as Quiksilver Inc., Billabong International Ltd. and O’Neill.

Surfing East Cape, Old Man’s and other beaches in the morning, participants holed up in a dim ballroom in the afternoon to pick the brains of Patagonia Inc. founder Yvon Chouinard, skateboarder Tony Hawk, film director Rob Cohen, and executives from Nike Inc. and ESPN Inc., among others. Technology guru Guy Kawasaki’s points about the entrepreneurial spirit hit home with representatives from companies ranging from Billabong to Rusty.

“We’re an established industry, but we’re a growing industry,” said Enich Harris, marketing director for Irvine, Calif.–based Billabong.

The surf industry is at an interesting juncture. As Chouinard asserted, all one needs to surf is a wet suit and a surfboard. Yet, according to a new Leisure Trends Group retail study commissioned by SIMA, sales of boards, footwear, apparel and other items grew 8 percent last year to $2.46 billion in surf-focused stores, excluding department stores, company-branded stores, discount retailers and Pacific Sunwear of California Inc. There are more than 115 brands in men’s apparel and more than 59 labels in women’s apparel. Some critics have said privately that if you remove the logos, the clothes all look the same.

There also seems to be disequilibrium between the huge sales opportunities women provide and the small industry respect they receive. SIMA finally started a category for Women’s Brand of the Year two years after it began bestowing its Image Awards. ESPN does not broadcast women’s surfing in its “X Games” coverage.

Maintaining the surf spirit

Still, the surf market overall is big business, with its share of large-scale public companies such as Huntington Beach, Calif.–based Quiksilver, as well as newcomers such as Zumiez Inc., the Everett, Wash.–based action-sports retailer that raised $56.3 million May 6 in an initial public stock offering on the NASDAQ. Volcom Inc., the edgy maker of surf, skate and snowboard apparel in Costa Mesa, Calif., recently filed to hold an IPO, also on the NASDAQ.

In recent years, corporate behemoths also have entered the action-sports sector by acquiring key brands. Nike Inc. owns Hurley International, VF Corp. has Vans Inc. and Reef Holdings Corp., and Warnaco Group Inc. holds Ocean Pacific. Even giant Quiksilver has grown through acquisitions, swallowing DC Shoes Inc. and Skis Rossignol SA. Small brands—ranging from The Amerikan Project to Ezekiel Clothing to RVCA—are proliferating. And Abercrombie & Fitch Co.’s Hollister Co. surf label is raking in sales in 260 stores and generating resentment from surf companies because it is “outside of the tribe.”

Said OP Chief Executive Officer Dick Baker, who also serves as SIMA’s president: “The big brands are getting bigger. The little brands will always be there. The middle is going away.”

Corb Donohue, an associate at San Clemente, Calif.–based job site Boardsportjobs.com, said it is important for acquired companies to maintain the integrity of their lifestyle. “It could so easily be homogenized, if they don’t stay the course, and become absorbed into the general merchandise apparel industry aimed at teen-agers,” he said.

Knowing your customer

But for legendary skater Tony Hawk, the leap from specialty store to general merchandise was right for his namesake clothing line.

Quiksilver, which bought Hawk Clothing in 2000, recently struck a deal with Menomonee Falls, Wis.–basedKohl’s Corp. to sell the line exclusively at the 669-store budget department chain beginning in spring 2006.

Decked out in a Quiksilver tee, Hawk praised the deal, noting that it will widen distribution for the brand.

The young men’s and kids’ skate collection was previously sold in Nordstrom Inc. and other specialty stores, but Hawk said the prices were too expensive for his young fan base. “It’s more available now,” he said.

Hawk cautioned against indiscriminate licensing but added that he would love to see more Hawk-branded stores in the future.

Quiksilver currently operates three Hawk Clothing stores in New Jersey, Utah and California.

Taking an environmental approach

Patagonia’s Chouinard, who once described surf companies as “lemmings heading for the monoculture in the sky,” said the Ventura, Calif.–based company is jumping into surf because the aging outdoor sector is shrinking and mountain resorts are hardly seeing snow. The privately held company, which sells about $230 million in product annually, markets women’s rash guards, swimwear and boardshorts through its Water Girl USA Inc. business. The company is currently developing surfboards and offering men’s surf trunks made of recycled polyester.

Working with Teijin Ltd., a Japanese company that Chouinard said invested $100 million in building a factory that recycles polyester, Patagonia will take back used surf trunks and other recycled polyester items and send them to Teijin for further recycling. Starting in Fall 2006, all Patagonia underwear will be made of recycled polyester, he said.

Chouinard’s approach is contrary to accepted business practices, although his environmental efforts were praised by Surf Summit attendees. Patagonia donates at least 1 percent of net sales to environmental groups. It does not participate in shows such as Action Sports Retailer Trade Expo or focus on surf shops. Although Chouinard could not name a surf company he admired, he received a standing ovation. Executives from companies including skateboard maker Sector Nine later sought his advice on making environmentally sustainable products.

’Big, growing and fragmented’

Leisure Trends’ retail study represented what SIMA called the first definitive survey of the surf and skate industries. Boulder, Colo.–based Leisure Trends President Jim Spring said the two industries are “big, growing and fragmented,” indicating that they have plenty of brands, innovation and good health. After conducting telephone surveys with 404 randomly selected retailers, he reported that, in 2004, skate and surf combined tallied $6.52 billion in sales in all channels, including PacSun and department stores. In core retail sales, skate had $2.41 billion and surf had $2.46 billion. The average surf store carried 5.7 men’s apparel brands and 4.7 women’s apparel labels.

Spring said surf and skate shoes formed the biggest chunk, with $922.6 million in sales, followed by men’s apparel, with $911.2 million, and women’s apparel, with $489.6 million. Spring’s final words to surf companies were: “Keep selling lifestyle. Product-centric business doesn’t fly. Passion leads to lifestyle.”

Ron Abdel, owner of Jack’s Surfboards in Huntington Beach, disagreed with some of the study’s findings. He said he would not open a store selling only shoes. “Shoes are slowing down,” he said, noting that he did not participate in the study. “Apparel is number one.”

Leisure Trends identified women as the fastest-growing sector in participation and sales. In his presentation, Shaheen Sadeghi, owner of The Lab and The Camp shopping centers in Orange County, said that “over the next five years, the most powerful consumer in America is the woman.”

Nonetheless, women’s recognition in surf is still a long time coming. ESPN “X Games” General Manager Chris Stiepock said that in order to include women’s surfing in “X Games” broadcasts he would have to take away another program. Last year, ESPN began airing five-minute snippets of women’s street and vert skateboarding competitions.

Other news from the summit included:

bull; Eddie Brown of Nike’s sports marketing division raised the prospect of Nike gaining further ground in the boardsports business. He said that if the Beaverton, Ore.–based company were to expand more into action sports, it would stay “true to the core” and do it through acquisitions.

bull; The interview between Rob Cohen and Quiksilver Vice President Matt Jacobson revealed that Quiksilver executives are producing a Stacy Peralta–directed movie called “In Search of Captain Zero,” with Sean Penn in the cast.

bull; New York–based branding consultancy Red Scout suggested ways to expand surfing’s influence into atypical markets such as Manhattan.

bull; The surf companies expounded on their love-hate relationship with Hollister, whose clothes sell like gangbusters and help increase surfing’s profile. Billabong’s Harris complained that Hollister takes from the surf culture and does not give back to the Surfrider Foundation, SurfAid International and other charities. Hollister is not a SIMA member. Representatives from Abercrombie in New Albany, Ohio, did not return calls for comment.

bull; DMG World Media’s Surf Expo trade show representatives said it will offer 2,300 booths during its Sept. 16–18 show in Orlando, Fla., and 1,700 of them are intended for boardsports. It also said Volcom doubled the purse for the mini-vert skate ramp contest to $20,000.

bull; VNU Expositions’ ASR said software provider Adobe Systems Inc. will come to the Sept. 9–11 run of its San Diego show and assist companies with presentations.

bull; The European Surf Industry Manufacturers Association said it will hold its own Surf Summit in Safi, Morocco, in October.