Kukla's Korner Hockey
by George Malik on 12/12/11 at 11:58 AM ET
Maybe the hockey equipment industry is the canary in the economic coal mine. After the lockout, one of the most common refrains in regarding hockey equipment companies involved the suggestion that such companies were, at best, niche companies which offered flat profits and very minuscule opportunities for any sort of economic growth—basically speaking, aside from battling for player endorsements and/or unveiling a product line that might take off, any hockey equipment company was stuck in its spot on the first, second or third line, and as such, it wasn’t a good investment.
Several companies soon either disappeared, filed for bankruptcy or were bought out by wealthier competitors with multi-sport reach and/or strategic partnerships with Canadian retailers. Over the last few seasons, however, the makers of hockey equipment have rebounded in a big way as leaner and meaner enterprises, and despite the fact that the NHL charges an inordinate amount of money for companies to place their names on their own sticks, skates, gloves, helmets, pants and goalie gear, several “independent” brands have found a way to make things work.
The companies that came out of the economic mess which still affects many industries and families thanks to their owners’ willingness’ to “buy low” instead of selling high, like Easton, Warrior, CCM-Reebok and Bauer, have found significant success, and MacLean’s Alex Ballingnall profiles the resurgence of Bauer Hockey, which Nike tossed off its portfolio as a revenue drag back in 2008:
Roughly 90 per cent of NHL players wear at least one piece of Bauer equipment. Seven out of 10 wear Bauer skates. As the puck dropped on the current NHL season, Bauer was the top hockey stick provider for the league’s players—beating out rival Easton—thanks in part to the introduction of the new Vapor APX model. Meanwhile, Bauer says it has surpassed legendary brand CCM—bought by Reebok in 2004—to become the leading seller of sticks, helmets, skates and goalie equipment.
It’s a radical change of fate for the company, which just a few short years ago seemed all but down and out. Sports giant Nike bought Bauer in 1994, when hockey’s growth in the U.S. market seemed almost limitless, buoyed by the latest fad of in-line skating. But by 2008, with the economy in a tailspin, hockey participation rates in Canada falling and the U.S. hockey experiment in shambles, Nike dumped it, selling to investment firms Kohlberg and Co. (best know for buying distressed companies) and Roustan Inc. for US$200 million—a steal compared to the US$395 million Nike paid in 1994. Davis admits it was a “very uncertain time.”
But rather than retrench, Bauer embarked on an aggressive acquisition strategy, absorbing companies that could expand its scope and complement its existing products. Davis credits Bauer’s new owners for their support. “It was a huge benefit to our company to have a financial sponsor who was willing to invest in our growth,” he says.
Four months after the Nike sale closed, Bauer bought Mission-Itech, a California-based face mask, goalie and protective equipment company that also made road hockey gear. Soon after, it purchased Jock Plus, noted for its patented undershirt featuring a sewn-on Kevlar neck protector. Bauer then entered the lacrosse market in June 2010, purchasing Maverick Lacrosse. The strategy is paying off. Revenues in the most recent quarter increased 29 per cent over the same period last year to US$142 million, while gross profit jumped 33 per cent to US$59.5 million.
The Bauer lineup now also includes an influential figure in the hockey world. Its chairman, Graeme Roustan, is behind a recent plan to build a 20,000-seat arena north of Toronto that could conceivably host a second NHL team in the GTA. Roustan, who grew up playing hockey in Montreal, primarily invests in the arena and aviation industries. In the late 1980s, he was involved in efforts to expand the NHL to San Jose and nearly bought an AHL team in 2004, the Toronto Star reported. He was also considered a potential buyer of the Montreal Canadiens when the club was up for sale two years ago. And according to the Quebec newspaper Le Soleil, Roustan is a loyal friend to NHL commissioner Gary Bettman.
Bauer’s post-Nike period hasn’t been entirely free of speed bumps. In March 2010, reports surfaced that some of its children’s hockey sticks—made in China—were contaminated with lead. The company quickly recalled 100,000 sticks. But rather than losing consumer trust, Bauer managed to strengthen its market position. Davis says that’s because of the company’s frankness and generosity (allowing consumers to trade in sticks for higher calibre models) during the recall.
A year later, Bauer debuted on the Toronto Stock Exchange, garnering $75 million when 10 million shares sold for $7.50 each. The stock hasn’t moved much since, but CIBC analyst Mark Petrie puts that down to the current economic climate. “I don’t think the share price reflects what the company has delivered in terms of results,” he says. Davis, meanwhile, insists the IPO was a step forward. “In hindsight, people can look at the timing of the marketplace and question that,” he says, “but we were able to refinance our debt [and] get lower interest costs.”
Here’s hoping that the fares of companies like Bauer are indicative of better economic times to come for people like you and me.
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About Kukla's Korner Hockey
Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.
From breaking news to in-depth stories around the league, KK Hockey is updated with fresh stories all day long and will bring you the latest news as quickly as possible.
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