Back in 1979, legendary investor Warren Buffett said something that has been quoted frequently ever since: “Both our operating and investment experience cause us to conclude that turnarounds seldom turn.”
But brand owners continue to believe that turnarounds are feasible and the new owners of Quicksilver’s North American operations must be hoping that Buffett was wrong in their case.
The brand spectacularly went from hero to zero in the key US market a few years ago, ending in a a US Chapter 11 bankruptcy filing and a bit of confusion for the rest of us (the problems didn’t affect Quiksilver’s Asia-Pacific and European ops, you see).
So what went wrong in the markets where it didn’t go right (see what I mean – confusing)? Its lossmaking ownership of Rossignol, criticism of poor factory conditions, and concerns over objectification of women in its advertising came together with the basic problem that surfers no longer saw it as cool while non-surfers bought their surf-influenced clothing from other fashion brands.
But now under the ownership of Oaktree Capital Management, the North American unit got US court approval for its $600m refinancing late last week.
Oaktree wants to rebuild Quicksilver from the ground up. There will be a new-to-the-US retail format called Boardriders with larger stores. Underperforming stores will be axed. The whole apparel range will be re-thought and the stores, which will also sell the company’s surf, skate and snowboards, will be dressed up with live music and barbershop services, according to reports.
The company is also streamlining its product offer and cutting SKUs, reworking its supply chain and examining its deals with athletes and licensees.
The big question is, can Oaktree (which also owns nearly 20% of Quiksilver rival Billabong) make it work. Can the private equity firm defy Warren Buffett’s prediction? We’ll have to wait and see.
If you want to read more about what went wrong at Quicksilver, check out this piece from OCWeekly.com.