With its European sales expected to decline by about 25 percent for the financial year ending next June 30, Rip Curl is streamlining its European operations in terms of staff, stores and product offerings. The Australian surf brand, which is performing well elsewhere, has decided to concentrate on its more technical strengths in a difficult and competitive market where surf styles are less in fashion than before, penalizing the smaller players.
Having suffered major drops in product areas such as jeans, shirts and sweaters, Rip Curl has decided to drastically reduce the number of SKUs in the fashion segment of its European collection, eliminating for example a number of items that were targeting young girls who are going for the much cheaper products of H&M or Zara. It will continue to offer boys' clothing, but it will concentrate on the age group between 15 and 30 years.
In the more fashionable segment of its apparel range, the share taken by Rip Curl's highly creative international collection will grow from half to two-thirds of the total range offered in Europe. Rip Curl's European line will end up with about 1,000 items including its very functional wetsuits and boardshorts, whose sales have remained rather stable, and its women's swimwear, supporting them with the ongoing sponsorship of iconic male and female surfers.
The number of retail clients in Europe will be reduced to only about 2,000, down from a peak of 3,500 reached in 2007-08, keeping the core surf and snow shops in the sea and mountain resort areas. The brand will have less of a presence in fashion and multi-sport retail stores, many of which are getting out of surf altogether. It has already stopped doing business with most of the Spanish buying groups and cut off retailers who are not paying their bills on time.
In fact, while Rip Curl's total turnover in Europe is set to go down by about 25 percent to around €75 million for the past 12-month period, its sales on a same-client basis have declined by only between 10 and 15 percent, and its European operations have remained profitable. The ongoing streamlining process is expected to further reduce its annual sales in Europe to a tentatively budgeted level of €60 million – half the level reached in 2007-08.
Out of this turnover, between €15 million and €20 million should come from equipment. A similar amount should come from boardshorts, women's swimwear and mountainwear, led by snowboard clothing, for which the demand has increased. Cuts will also be made by Rip Curl Europe in the equipment sector, keeping only the more technical watch models of the brand and licensing out its prescription eyewear to its French distributor, ADSL, for the whole European market.
On the employment front, after holding consultations with the unions since last April, Rip Curl has decided to reduce its European staff from about 250 to 200 people. It will eliminate 47 jobs in France including 29 at its head office and five in logistics, plus the employees of five stores that will be sold to other retailers. Rip Curl will also dispose of five stores in Portugal, Spain and Sweden. Some sales employees in Spain and the U.K. will be taken out of the staff and turned into sales reps.
Rip Curl will end up with a total of about 50 single-brand stores in Europe, half of which will continue to be owned by the company. Most of the 30 remaining stores in France will be located at key sea and mountain resorts, and they will emphasize the technical elements of the collection. Outside France, Rip Curl will focus on the surf spots in Spain and Portugal, where it has a dozen doors. It will also concentrate on the French and Swiss Alps.
Announcing these measures to a small number of journalists during the past weekend at its European head office in Hossegor, on the Basque coast of France, Olivier Cantet, global president and chief executive of the group, explained that Rip Curl's problems started with its apparel range in the U.K. in 2008, coinciding with the economic recession. They then spread to Spain and Portugal, which has remained a disaster area for Rip Curl with a sales decline of about 30 percent for the present financial year. The important French market, which traditionally represents about 40 percent of the brand's European sales, started to weaken last July, in line with the overall trend in the country's apparel consumption, and Rip Curl's sales there are off by about 15 percent. The high Swiss franc led Rip Curl and other suppliers to reduce its prices in Switzerland, but this did not prevent a sales drop in that country as well.
On the other hand, sales to the brand's new Italian distributor, Oberalp, have been relatively stable. Sales have gone up in Scandinavia, but the company's 5-year-old Swedish subsidiary is seeing its area manager for the Nordic countries, Jonas Sund, leave Rip Curl to act as Oakley's sales manager for Scandinavia after 12 years with the brand, initially as an agent. Olivier Lemaire, a manager of Rip Curl Europe in charge of men's sportswear, has left the company too, moving to Skullcandy's new European office in Switzerland to take care of the sports retail circuit.
Incidentally, Rip Curl is going to work more closely with Skullcandy, offering its headphones in its own European stores along with a co-branded line of hooded jackets signed by Mick Fanning, a surfing champion who is sponsored by both brands. Most of Rip Curl's stores have also started to offer a large selection of Oakley sunglasses next to its own less sophisticated models.
While keeping his international responsibilities, Cantet is spending more time now in France to lead the reorganization and repositioning of the brand in Europe after the departure of the former chief operating officer, Baptiste Coulonque, who is now running Oxbow. Fred Basse, one of the founders of Rip Curl and president of the European surf industry federation (Eurosima), is concentrating on marketing for the brand. Matthieu Lefin, finance director, is taking charge of logistics as well. All sales activities continue to be run by Yann Tschumi, who came back to Rip Curl one year ago after stations at Oakley and Vans. He has some ideas about e-commerce.
Marking its new orientation, the company is about to inaugurate a “Rip Curl Technical Surfshop” of 400 square meters at its European head office, next to its existing factory outlet, after a successful test in a small temporary store at Hossegor. It displays more than 400 different surfboards, with an area for customization, and about 20 types of wetsuits in different sizes and colors. The store will feature a wide selection of boardshorts, T-shirts and other items, plus a bar and a wi-fi area.
There will be no major adjustments in the product offer in the rest of the world, where sales have been positive this year, leading to relatively stable global revenues of around 400 million Australian dollars (€317.2m-$396.2m) and an improved operating profit of around 10 percent before amortization (Ebitda).
Rip Curl claims to have gained market share in the somewhat flat and competitive market of Australia and New Zealand, which currently generates around 40 percent of the global turnover. This is being attributed in part to the good performance of the Ozmosis chain of multi-brand surf shops that Rip Curl bought a couple of years ago along with a smaller one, called Waves. The latter is being merged into the well-managed and profitable Ozmosis network to form a chain of 35 stores run under the same banner, complementing the 40 Rip Curl single-brand stores in the same region.
Rip Curl has about 300 stores around the world, owning most of those that operate in emerging markets. It has just opened its eighth airport store in the Virgin terminal of Sydney's airport. The strategy is different in Europe, as the airport of Biarritz, close to the European head offices of Rip Curl and other surfwear brands, hosts a Quiksilver shop.
Compensating for its European problems, double-digit increases are being scored in the U.S. and many emerging markets such as Brazil, Argentina, Chile, Peru, Indonesia, Thailand and China. Sales have reached levels of roughly US$30 million in Brazil and $50 million in the U.S. The well-managed U.S. subsidiary is capitalizing on its technical expertise and concentrating on independent surf shops in California.
While introducing new products for the spring/summer 2013 season, such as a one-piece boardshort in quick-dry, four-way stretch fabric, Rip Curl has come up with a new logo for its men's lines, which represent the biggest portion of its sales.
The company will continue to sponsor the annual Rip Curl Pro surf competition in Portugal, adding co-sponsors to help finance the event, as well as the annual Bells Beach competition in Australia. However, it will no longer sponsor a music festival in Biarritz. Held at different exotic locations around the world, the Rip Curl Search will be organized only once every two years.
