I have learned from a well-placed source that Billabong has put the West 49 chain and some other banners in Canada up for sale.
Banners on the market include West 49’s 70 stores, 18 Amnesia stores, six Billabong stores and two Element stores, I am told.
The news comes in the midst of the protracted negotiations to possibly sell all of Billabong, or pieces of it, that have been going on for months.
Billabong acquired the struggling, mostly skate-based chain in mid-2010 for CAN $100 million, or CAN $1.30 per share, more than double West 49’s share price of 55 cents at the time. The company borrowed money to make the purchase.
Post Billabong acquisition, West 49’s business, which was also difficult when the company was independently owned, has not met expectations.
“The business cannot stand still”
New Billabong CEO Launa Inman, who took on the top leadership role at Billabong in May 2012, said in February during an earnings conference call that West 49 has reported negative comps each year since the company purchased it.
While sales trends have improved the last five months at West 49, overall, conditions are still difficult. The wholesale action sports market for the industry in general is also tough in Canada at the moment.
I contacted Billabong spokesman Chris Fogarty in Australia about the retailer being up for sale, and he declined to comment on specifics.
He did indicate that the business needs to move forward despite the unusual circumstances.
“The business cannot stand still. We have previously detailed our plans around transformation and global simplification, including retail, and where and when appropriate we will action them.”
See Page 2 for more details, including Zumiez’s past interest in West 49
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The original plan
At the time of the acquisition, Billabong discussed the rationale behind the purchase. In particular the company was bullish on the prospect of adding more Billabong-owned brands to the product mix to increase margins and showcase more family product.
It will be interesting to see if Zumiez is interested in acquiring West 49. After the Billabong plan was announced in 2010, Zumiez offered to put in a bid that exceeded Billabong’s but was subject to due diligence.
However, West 49 and Zumiez could not agree on due diligence terms, partly because West 49 was leery of opening its books to a competitor who was entering the Canadian market.
Zumiez ended up expanding on its own in Canada, and at the end of 2012 operated 20 stores there, which are performing to expectations.
The company has said it will open as many as 10 stores in the country this year, and is still bullish on long-term growth prospects in the country.
Meanwhile, Billabong negotiations continue and trading in the company’s stock is currently suspended while it sorts through its next steps.
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