UKH

FT Sat 16 Dec 2023

Sale of outdoor clothes brand Rab explored

The owner of outdoor sports brand Rab has appointed advisers to explore options including its sale, according to two people familiar with the process.  Equip Outdoor Technologies, which also owns sister label Lowe Alpine, has in recent months enlisted bankers at Raymond James to weigh opportunities for Rab.

https://www.ft.com/content/0cbf9ee9-2e79-4286-a1fb-d866db4e8c01

http://archive.today/2023.12.15-070151/https://www.ft.com/content/0cbf9ee9-...

In reply to yorkshire_lad2:

Oh no....!! they did some decent kit, and not just a load of fashion stuff (maybe that was the problem?). 

Edit: OK this is where I'm not a financial person... So if EBITDA (earnings/profit before interest taxation depreciation and amortization) had increased to £20 million but the pretax profit had fallen to £14 million (from 16 million) ... ... ... then the difference is that interest, depreciation/amortization has gone up. Given GAAP accounting standardises depreciation and amortization over a period, then it sounds to me like the Interest has gone up? What other explanation could there be?

So the owners Equip have over borrowed (over leveraged their business) and through mismanagement shambles are now looking to sell Rab to cover their backsides?

Pretty pathetic!

In reply to CantClimbTom:

Not sure if you've noticed, but there was a global step change in inflation & interest rates in the last 18 months, primarily due to Russia's invasion of Ukraine. Not sure failing to predict this invasion counts as financial mismanagement.

In reply to CantClimbTom:

I wish I could be guilty of misnanagement and still make 14m profit despite rising interest rates

In reply to captain paranoia:

That's what's meant by over leveraging, that they were unduly exposed to such fluctuations, given that COVID and post COVID was actually a boom for outdoor products they should have had reserves not high maintenance debts 

In reply to CantClimbTom:

Alas there has been no board in the history of capitalism that has been blessed with the gift of hindsight when making their decisions.

In reply to CantClimbTom:

What have I missed in the article as I didn’t read anything about mismanagement or over leverage? 

In reply to CantClimbTom:

Actually it's so common it should have been predicted. When larger corps buy up a number of niche/tech/grassroots brands to achieve market dominance, economies of scale etc, it usually ends with some kind of eventual 'rationalisation' and the more middle of the road product, in whatever industry, with the highest volume and margins, survives while the taps get turned off for the less profitable specialist brand.

In reply to captain paranoia:

Hmm. Nah. The corporate world in general has never really restabilised after the GFC and so many companies are running massive debts. It's become normalised. Much of this cheap money is used to buy out competitors, which looks like growth, and/or buy back stock, which boosts the stock price, as opposed to increasing sales performance, technical innovation or productivity.

But eventually, the cheap money runs out (someone, somewhere, always needs to get paid back) and the cost of borrowing goes back up, meaning bizarrely low interest rates of the last decade go up, because eventually they have to - regardless of minor wars etc - and something has to give.

In reply to Damo:

So does this mean it is not 'financial mismanagement', if it's now 'normal'? Would financial advisors advise this behaviour? Presumably they did, otherwise companies wouldn't be doing it. People lending money have to consider the risk of lending it; presumably, they thought the risk was reasonable, in the existing financial climate. Isn't that one of the lessons supposedly learnt from the GFC...?

https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

It may be a 'minor war', but it had a massive impact on the price of energy, grain & other agricultural commodities (since Ukraine is still the 'breadbasket of Europe', and we had been buying vast amounts of gas from Russia). This is what had a massive impact on inflation & interest rates. If you didn't notice this in the prices of food & energy basics, you must be very insulated from everyday household budgeting. I mean, even the price of Sainsbury's marmalade doubled in price...

In reply to yorkshire_lad2:

I was surprised how small the financial numbers were for Rab considering they have a puffy jacket in nearly every pub and a presence in the US. The kit doesn't wear too well these days but it would be a shame if the spreadsheets and analysts turn it into a fashion brand if it does get snapped up.

In reply to olddirtydoggy:

This stuff just happens.

Brand makes good outdoor gear, it sells well and becomes visible. The man in the street buys it (who can blame him.given UK weather). Brand becomes fashionable, accountants cut corners which only effect the original outdoorsy users but by now they are a small percentage of turnover.

Berghaus, tnf etc.

Another outfit will be along shortly to repeat the process.

In reply to olddirtydoggy:

I disagree with the masses, I think Rab's "Original Pile" is THE pub jacket of pub jackets. (Maybe my spell check isn't with me on that, as it "corrected" to "Original Puke")

... ... turn it into a fashion brand if it does get snapped up.

Again, if they'd sell more Pile they'd avoid the fate of being seen as another outdoor themed fashion brand 

In reply to CantClimbTom:

With broken zips. Not sure why they always use the shittest zips on the market. Or throw sand in them at the factory, or something. But they always always seem to break on Rab kit.

In reply to yorkshire_lad2:

It'd be a shame if they go the way of other outdoor brands that get taken over by large corporates as they do make some good/innovative gear (even if these are often discontinued fairly quickly):

Strata jacket

Alpha Flux/Direct

Kinetic Alpine 

Their sizing also fits me perfectly. 

In reply to CantClimbTom:

Don’t know how to tell you this but thick pile is in! Every brand makes a “rab classic” Sherpa fleece style jacket now

In reply to Longsufferingropeholder:

"With broken zips. Not sure why they always use the shittest zips on the market". 

TNF:  Hold my bottle of overpriced Venezuelan lager

In reply to Longsufferingropeholder:

I wouldn't have understood and downvoted that, saying they use chunky YKK zips on a lot of stuff.

But only the other evening I parked in Tesco and about to jump out of the car when almost by magic the jacket suddenly had the zip done up near the top but was wide open. Took me a while and carefully selected words to wrestle the zip to the bottom again and free myself. The zip appears perfect with no wonky teeth, can't see how it was possible and it is the second time now! 

In reply to Tingle:

You've genuinely spoiled my morning with that didn't realise, didn't even suspect. Whatever next... is the new Uber cool going to be Buffalo? 

Edit: in Rab's defence, that jacket has had a lot of use!

In reply to Ennerdaleblonde:

Had to dump Rab when they stopped making items in XS. Montane heading that way too unfortunately.

Anyone have any suggestions other than Patagonia that are still good for XS?

In reply to Damo:

Hmmm that’s not how it works. You do realise central banks set interest rates right?

In reply to captain paranoia:

It depends. Some would say that what has become normal is indeed financial mismanagement. Time will tell. Lots of things had become normalised before the GFC too - CDOs, junk mortgages etc. Just cos lots of people are doing it doesn't make it right. Look at bouldering...

I live in Australia. Interest rates went up here quite a lot, and inflation to 9% or more, and we are nowhere near as exposed to Ukraine as the UK is. Ditto the US. Ukraine is only part of the issue for you there, but easy to blame that rather than look closer to home.

Covid's effect on supply chains was one factor that pushed prices up, but corporate price gouging has been another. Company profits are still high, record high in some cases. 

In reply to CantClimbTom:

As long as the teeth are still good, fixing a split or stuck zip is generally an easy job for any repair center/outdoor store with a good selection of YKK runners. 

In reply to mik82:

You must be a very weird shape then.

In reply to OwenM:

A lot of climbers are a weird shape. Going by the cut of most “outdoor” clothing manufacturers’ wares, normal seems to be narrow back, short arms, no shoulders and ready to drop triplets.

In reply to 65:

Have you visited Connah’s Quay?

In reply to yorkshire_lad2:

Just a thought, but is it just maybe possible that nothing is wrong and that the owner has been doing what they've been doing for 30 years and just fancies doing something else? I mean I know its not the explanation that some seem to be seeking on this thread but it is, just maybe, a plausible one?

In reply to OwenM:

Haha. Well if being slightly taller than average and in the 36% of the population that's not overweight or obese, then yes!

In reply to mik82:

I realise there are 'large corporates' and there there are large corporates - but didn't this already happen to some extent when Rab himself sold up and Equip acquired the company in the first place?

In reply to smbnji:

Decathlon.

In reply to smbnji:

Berghaus, not all... but many of the jackets, fleeces etc come in an XS option 

https://www.berghaus.com/men-s-cornice-interactive-jacket-dark-blue/1313986...

https://www.berghaus.com/men-s-prism-polartec-interactive-jacket-black/1189...

In reply to captain paranoia:

Although it's their 'S'...

In reply to captain paranoia:

but not always

In reply to Doug:

Yeah, sometimes their S is others' XXS...

I've found their sizing to be pretty consistent, in that their 'M' fits me perfectly. Apart from cycling gear, but all cycling gear sizing seems to be based on tiny, tiny Italian people...

In reply to captain paranoia:

I have two short sleeved cycling tops from Decathlon, the one labelled small is larger than the other which is supposed to be medium. Luckily they have a shop in our local town so I can try on before buying.

In reply to yorkshire_lad2: There is a lot of analysis of those numbers on this thread that may or may not stand up to much scutiny- the original links work for me so what were the earning the year before when the 16m profit was made-.

And what's the prediction for next year.  Dropping profits from 16 to 14 may be the end of the world, or it may well not be

In reply to CantClimbTom:

So, basically you do not know what you are talking about, but hey ho, crack on.

In reply to Godwin:

I *used* to work in market data and financial analytics around quant analytics datasets for asset allocation and company/share valuations, but not for many years. So I half know what I'm talking about which is probably at least as good as the average on this site. That said I'm more prudent than average around loans and leveraging having watched a company I worked for pillaged and ruined by some greasy charlatan directors who borrowed like mad until it all collapsed and ran off with their backsides covered but the ordinary employees were left in the lurch.

So let's crack on..

In reply to smbnji:

Going from personal experience of their sizing, is a Patagonia XS not just the equivalent of S in most other brands?

In reply to nathan79:

Nope, chest sizes for example:

• Patagonia XS: 89cm
• Rab S: 94cm
• Montane S: 97cm
• Mountain Equipment S: 92-98cm (quite the range!)
• Arcteryx S: 94

The majority of these manufacturers also list a more aligned XS on their size guides, but make few to no products in the size.

In reply to Tyler:

Exactly! It's behind the paywall but the article values the business at £150m, seems to all be going well.

I think this is good news, great to see a UK-ish brand get bigger and more successful! Well done to Matt Gowar who owns 50-75% the article says. I still think the quality is reasonable and it isn't blingy like TNF/Arc. 

And if it gets bought it might even get bigger and better, you never know... this general negative outlook is very UKC!

In reply to Eduardo2010:

A company valued at ca. 10x profit means it's established but going nowhere, in the fickle outdoor clothing market not a good sign realistically.

In reply to jimtitt:

Actually... in clothing,  a PE ratio of 10 isn't bad at all

https://companiesmarketcap.com/clothing/clothing-companies-ranked-by-pe-rat...

In reply to CantClimbTom:

Using a share valuation against share earnings isn't very applicable to a privately owned company and gross profit. Assets/debt and brand valuation would set the price.

In reply to jimtitt:

Well.. I was trying to make a just-for-fun comparison of the valuation to earnings of a privately held company (Rab) with the Market cap to earnings (via PE ratio) of the publicly traded peers in clothing. Following the principle of equity (if you own all the shares you own all the company) they are similar (ish) things, but yes it's stretching it and risking apples versus oranges. But my point was that actually that ratio wasn't so bad for its sector.  You're quite right though, the debt is the more pertinent issue. And the devils in the detail, not just the overall amount with that for sure!

Rab lost its reputation for quality, but maintained a bit of innovation.  In the last year I have brought two new high end winter down sleeping bags, one new puff piece and a new belay jacket to replace ones that were 10-20+ years old.  

On the basis of previous experience of Rab stuff falling apart at the seams and zips failing, I didn’t even consider looking at their offerings.

That in a nutshell is the problem quality kit lasts and when it doesn’t buyers have long memories. So if you piss-in-your core bed, you are reliant upon wider fashion buyers, and then are at the mercy of market swings.  The market is retracting as the general public aren’t shopping as much.

Why climbers think they have ownership over a brand just because they are nostalgic for the 80s puzzles me. There is loads of outdoor clothing available. In the event that this totally anodyne story does indeed result in the sale and total destruction of the brand (as yet unproven), then people will find something else that fits!

In reply to Damo:

(Karrimor)