Billabong is back in the line-up. Billabong catches a swell. Billabong gets a lifeline. Ok, enough of the surfing puns – Billabong is back. Well, at least resurfacing from the serious position they were drowning in. A lot has happened since we outlined their dire state in June. Back then, the former giant surf- and streetwear retailer was about to go under (last pun, I promise) due to oversized debt ($289m) and pitiful revenues. At that stage, takeover talks with two private equity groups had fallen over and the share price had dived from a high of around $14 in 2007 to just 12.5c.
But last month they sealed a potentially life-saving deal. Billabong has agreed to a $325m rescue package with Altamont Capital Partners. As well as a bridging loan (with a 12 per cent annual interest rate), the deal also sees California-based Altamont take a 40 per cent stake in Billabong and add two of its own directors to the Billabong board. Altamont also purchased Billabong’s sports brand DaKine for $70m, which has helped clear some debt from the surf label’s books.
However, it’s not plain sailing just yet – the two hedge funds who had their counter offer rejected by Billabong have asked the Takeovers Panel to look into the deal, arguing that it is anti-competitive.
Already there is a new CEO. After just 14 months at the helm, Billabong chief executive Launa Inman has stood down to be replaced by Scott Olivet, the former boss of sunglasses brand Oakley. Could he be the man to reinvent and reinstate this iconic brand?
I’d say there are four steps Olivet will first take when he gets his jandals under the desk…
1 – He needs to get young, cool dudes wearing Billabong again, not the “tubby dads” (I can relate). To move ahead, brands need to reinvent themselves regularly. At its peak, the Billabong brand was to surfwear what Coke is to soft drinks. I’m not saying that Barkers is ultra hip or whatever, but the work done with the Barkers brand the past several years shows that brands can move closer to their origins and become cool again in the mass market world.
2 – Olivet needs to simplify the business and continue selling off non-core assets. A golden rule of strategy is that you cannot be all things to all people, which is what Billabong has been guilty of as it moved wildly out of its surfwear origins buying this, that and the other.
3 – He will need to think about what offers the most scope: for the businesses under Billabong ownership, are they best being a retailer or a wholesaler? Speaking idealistically (and obviously), they should potentially keep only the best stores (perhaps the best half) and systematically close down the rest. If only it was that easy! Given the power of online retail going forward, they could put more dollars into online experience – perhaps keeping a few bricks and mortar stores but concentrating on becoming the Asos or Amazon worldwide website of surf- and street-wear? It might not work but who knows. They should probably buy something like Surfstitch.com.au and take it global!
4 – Olivet is going to have to get his team quickly aligned and focused on what he thinks the best strategies are. No doubt many heads will roll as the current (pre-Olivet) executives will be tainted with the “They were part of the team that got Billabong into this mess” reputation. Use this chance to clean out of any dead wood, Olivet! Without knowing the intricate details of how rocky the state of Billabong actually is, it will be so important for the greater team and staff to know that their jobs are 98 percent safe so they can focus on going on to deliver great things, without worrying about how the company is going to change and whether they will have a job. If the team become massively dis-engaged, then it will be a vicious slippery slope at Billabong given the company will only be as good as its workforce.
I really look forward to seeing how the continuing saga of Billabong ends up – plain sailing or rough surfing? Must say, Billabong (if you are listening, thanks to the power of Google Alerts?) I would love to have you as a business coaching (or advisory) client 🙂