Far-reaching restructuring measures in Hi-Tec’s European business have caused double-digit sales declines in several markets, but they contributed to cost savings of $12 million and an improvement of two full percentage points in the company’s net margin last year.
Launched about two years ago, the European overhaul entailed the closure of several subsidiaries and the appointment of new distributors in countries from Italy to Germany and the Benelux, and all of the Nordic countries. While the transition triggered a drop in sales in these countries in 2007, current orders indicate that they should return to their previous level this year, with a healthier cost structure.
Meanwhile, Hi-Tec enjoyed robust growth in the European countries where it still has subsidiaries. U.K. sales climbed by nearly 10 percent in 2007 and they jumped by almost 30 percent for the first quarter of this year. Sales in France and Spain grew by a whopping 35 percent, driven by Hi-Tec’s outdoor category and its Magnum work boots. On the other hand, sales of racquet sports products and private label orders weakened. Taken all together, European sales rose by 1.7% percent to reach nearly $100 million, with the U.K. still representing over half of this turnover.
North American sales dropped slightly to $58 million and Hi-Tec is close to the same level so far this year in spite of the rough conditions in the U.S. market. The company’s business there was also impacted by the closure of its footwear factory in Maine, which was sold last September to Globe Industries, a fire-boot supplier. Hi-Tec had acquired the factory three years ago as a specialty manufacturer to be closer to the market, but the results could not justify the extra cost.
Further growth came from Asia, where Hi-Tec sealed several partnerships over the last years. Its launch in China was accompanied by the opening of 18 mono-brand stores, featuring unusually wide ranges of lifestyle-oriented apparel. There should be 25 Hi-Tec stores and another 10 Magnum stores in China by the end of the year.
Hi-Tec ended 2007 with sales of $220 million, an increase of just 1 percent compared with the previous year. The restructuring moves reduced operating expenses by about 16 percent or $17 million. However, about $5 million was pumped back into the company, invested in everything from product development and marketing to infrastructure.
The new international set-up was finalized in April with the appointment of Ed van Wezel, the son of the company’s founder, as chief executive of Hi-Tec International, supervising international activities, while Martin Binnendijk remains as the company’s actual chief executive. Van Wezel replaces Petr Hrbacek, who now supervises sales in Eastern Europe and Africa, replacing Matt Bruce.
Earlier this year Lee Devon switched from Nike Europe, where he worked as equipment sales director in the EMEA region, to join Hi-Tec in the new position of European sales director. Ian Cameron, former outdoor category manager, was promoted as U.K. sales director, replacing Glenn Bennington.
Now that the new structure is firmly in place, Hi-Tec is preparing the worldwide launch of its IonMask, a substance that impressively improves the waterproof and hydrophobic aspects of Hi-Tec outdoor footwear. The technology has earned the brand several innovation awards and will hit the shelves in August.
