Hot on the heels of a takeover offer for Billabong, Australian surfwear maker Rip Curl has put itself up for sale. The company that was founded in 1969, close to Victoria’s iconic Bells Beach, is hoping to realise a sale price of close to $400 million, although it’s more likely the sale will realise $300 million.
According to a report in the Australian Financial Review, Rip Curl has suffered a decline in sales in recent times, much like its larger cousin, Billabong International (ASX: BBG). With half of Rip Curl’s sales coming from surfwear shops in Australia, the brand has been hard hit by consumers unwilling to open their wallets and with an increased focus on price. According to the company’s accounts lodged with the Australian Securities and Investment Commission (ASIC), half year sales to 30th June 2011 fell to $8 million, compared to $15.5 million the previous year.
As well as selling to retailers worldwide, the company also operates corporate stores, and acquired 24 Rip Curl branded and multi-branded stores in 2012, in Australia and South Africa. Unlike Quicksilver and Billabong, Rip Curl has opted to remain a private company, and therefore hasn’t expanded as aggressively as its larger rivals.
Fashion retailers have a difficult job at the best of times. You only have to look at the poor recent results from Premier Investments (ASX: PMV) which owns brands such as Just Jeans, Jay Jays, Dotti and Smiggle, and Speciality Fashion Group (ASX: SFH) which operates retailers Katies, Millers and Crossroads. Likewise Noni B Limited (ASX: NBL) which has been closing stores and undergoing a process of re-inventing itself.
Competition from online sales and the high Australian dollar has meant consumers can buy well-known branded clothing and fashion accessories cheaper from overseas retailers. In an effort to win back customers, local fashion stores are aiming to increase their internet sales, and are pulling out all stops to encourage consumers back into the traditional bricks-and-mortar shops.
The Foolish bottom line
Rip Curl as a brand would certainly have some value to prospective buyers, and the timing appears interesting given private equity groups have made recent competing bids for Billabong.
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Motley Fool writer/analyst Mike King doesn’t own shares in any company mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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