A very (very very) long time ago I tried to learn to surf. The reality was I did not excel at it but I did learn that if you chose the wrong wave you could end up being ‘dumped’ in a painful way. On the other hand a decent wave could make for a highly pleasurable experience.
Recently two new CEO’s joined different surfwear companies and clearly chose different waves.
On the 9th May 2012, Billabong appointed Launa Inman as the new company CEO. Launa was previously the CEO of Target Australia where she did an impressive job delivering solid growth in a very competitive environment. However the market was not happy with the appointment. Shares fell on the announcement of Launa’s appointment with the market questioning the related skill set to the surfwear industry. Since the announcement Launa has had to deal with a difficult capital raising, massive write down and had no less than six takeover proposals from four different companies.
A quick paddle onto another wave, on the other side of the Atlantic, Quiksilver recently announced the appointment of Andy Mooney as the new CEO. WOW – the market loves Andy. Andy was formerly with Disney and Nike, which just like Launa, has a strong surf pedigree. O wait ….. but according to the market the actually does not matter. In Andy’s first 4 weeks as CEO the company’s stock has risen almost 50%. However Andy had already picked the right wave as the market was pricing considerable growth for Quiksilver prior to Andy’s appointment.
So why is it that two people with non-surf industry backgrounds can join similar companies and yet see dramatically different results? The reality is the companies themselves have been riding different waves.
The following is a very good summary of what went wrong at Billabong from the website SmartCompany:
“Inman says Billabong did not make a mistake going into retail; but it did make mistakes in the way it did so. The result? The company has already closed 58 stores, reducing store numbers to 634, and intends to close another 82 in the current financial year. Paying out leases on closed stores, selling off the inventory at reduced prices, then the reduction in sales from fewer outlets and the partial sale of Nixon all contributed to the significant and exceptional items. Then a big American customer, PacSun dropped Billabong and started making its own house brand.When sales fell, the company slashed its marketing budget. “In our quest to save profit, we cut our marketing budget, but that reduced our sales,” Inman told analysts and investors today, shouldering responsibility for a decision taken before her time. “Then, because of poor sales, we ended up with excess stock and had to mark it down.“
Source: http://www.smartcompany.com.au/retail/051449-surf-rescue-how-launa-inman-plans-to-save-billabong-2.html
Quiksilver, on the other hand, stuck to its core and the investment in World Champion Kelly Slater as the brand ambassador, helped drive the brand. Additionally the success of the DC Shoes brand as well as the recovery, albeit slow, of Roxy have all aided in the success of the overall Quiksilver company.
A quick view of some numbers shows the impact of the differences of the strategies. At the macro level, life for the two companies appears fairly similar.
However a little further down the P&L the sea becomes very rough for Billabong.
And finally a couple of stand-out lines in the Cash Flow statement
Put simply, Billabong is broken and Quiksilver is not. Launa paddled into the wrong wave and Andy the right one. Launa is going to have to paddle 10X harder than Andy. Sure Andy will have his pressure to improve Quiksilvers’s performance but he has caught a much MUCH better wave.
At some stage in our career we will all face a similar choice. It may not be to run a surfwear company but it will be about choosing the right role. The saying, “you have to be in the right place at the right time” is never truer than when making a decision regarding your next role appointment. Choose the right wave and the sky’s the limit. Choose the wrong wave and you can get dumped. Painfully.
