We talk to John Lacy about the crazy demand Burton is seeing online, the current strength of industry wholesalers after robust summer sales, and the potential “tidal wave of opportunity” that comes with new participants.
The big question on people’s minds as winter arrives is if the snow industry will see the kind of boost in participation and sales that biking, skateboarding, surfing and camping have experienced during the pandemic.
We spoke to Burton CEO John Lacy to get some insight into that topic and others. We asked John about current sales trends in Burton’s direct business, why Burton brought sales reps in-house, and how the company has navigated the pandemic.
We also talked about Burton’s new joint venture in China and the robust sales the brand is seeing there.
Overall, John is optimistic about how this new wave of participants are embracing socially-distanced action sports this year.
“If even a small percentage find a connection to standing sideways, and falls in love with skateboarding, surfing, snowboarding – that presents a tidal wave of opportunity for our industry when we’ve been flat or down for the last 10 years,” he said.
The last time we talked was in May. There hadn’t been any big retailer cancellation of orders. You had some furloughs, but you were feeling pretty good. What has transpired since then?
Burton CEO John Lacy: I think when we talked before, I had shared that we had gone back and made some trims in the supply chain because of all of the uncertainty. The goal was to protect our liquidity and to make sure that we kept a strong balance sheet.
As an organization, we pivoted to the online business very quickly. We don’t do a lot of business in that May/June/July period, but we were able to move some inventory. Then retailers, which early on had been expecting business to be really difficult, changed to having a really positive outlook.
We did have some cancellations, and we reduced our inventory position. But all the excitement around outdoor sports led to incredible success for retailers over the summer who carried skate, bike, camping and hiking.
Retailers said they were ready to take inventory from us, and we looked very carefully before we put shipments out the door because we wanted to make sure from a credit perspective that they were prepared to take it on.
So, we’re 80-plus% shipped around the world to our pre-season wholesale.
And the outdoor excitement continues, and we are seeing that on our own e-commerce. Year-to-date, we are up over 80% in our own digital direct business. And right now, we are regularly having days where we are comping close to up 100%.
We’ve seen some of that slow in Europe and a bit in Japan, but still really positive outlooks.
What about on the equipment side, this whole issue of resorts? I know the backcountry stuff is going crazy from what I’ve heard, splitboards, that sort of thing. What about your rank-and-file product for more of a lift situation?
John Lacy: At the end of the day, that makes up the bulk of our sales. As I mentioned, we are up year-over-year online, and it’s not because it’s all splitboards.
Some of our best sellers, like the Burton Process, is a mid-price point board. The Custom has always been a classic. We’re up 120% year over year in these items, so the consumer is there.
And in talking with resorts, they are doing an incredible job whether it’s through season pass sales, reservation systems, they’re thinking about different parking reservations to put controls in place.
We do see an opportunity, and you’ll see it more in our marketing going forward, this concept from the backyard to the backcountry and everything else in between, which is really the resorts. We have our Throwback board, which is really just a glorified sled to stand sideways and get people out there and having fun, all the way to splitboarding.
We just launched (this season’s) Step On (bindings and boots). Year to date, Step On makes up six of the top 10 items on our website. Kids’ outerwear is selling really strongly right now. Outerwear is comping similarly to what we’re seeing in board sales.
Not only have we had really strong shipping to our wholesalers and we’ve been moving goods out the door, but from a liquidity standpoint, any direct sale is cash directly in, so our borrowings are at an all-time low.
That really just continues to strengthen the balance sheets. As we weather the storm, I feel right now we’re in a much better position than when we spoke earlier during the pandemic.
Were you guys able to get PPP money?
John Lacy: No. We didn’t qualify because of our size. We’re too big to qualify there, and then too small when you think about all the bailouts the government gives for the big airlines and everyone else. We fit right in the middle.
But what helpful is for those that we did have to furlough, they were able to get their own federal support. That was really helpful because those were difficult decisions.
Speaking of that, have you been able to bring everyone back?
John Lacy: Yes, we did. We actually started in August. Again, we were in a really strong position on our bank deal. The first half was really important for us, and we delivered incredible results so that there were no triggers for any of our bank covenants, so we made the decision to start bringing people back in August.
With Step On bindings, I was blown away by the NPD data that showed how quickly Step On has gained so much market share. Did you expect that to happen so quickly?
John Lacy: We had a very controlled distribution strategy when we first launched in Winter ’18. We opened it really to just those accounts in Winter ’19, and then Winter ’20, we started to widen the distribution slightly. We were working on adoption of the technology, and it’s adopting. We went pretty big this year. We’re not selling out as fast because we’ve committed to more inventory.
Step On is 10% of our overall company revenue at this point. As I mentioned with our own digital, six of the top 10 sellers are Step On products. It’s weighted more in men’s. We’re putting a big push on women’s and kids’.
We’ve also done the arrangement with DC, so they’ve launched boots for the first time this cycle (with Step On). We’re in talks with other brands to extend that technology on boots as well, so that’s been part of how we try to get more consumers to adopt the technology.
I guess I am surprised. – I didn’t think it would catch on that fast at those kinds of volumes. For us, especially on the direct side, it is a big, big part of our business.
What are you guys seeing in China with your joint venture there?
John Lacy: In China, we now have stores in Beijing and Shanghai. Those stores are doing numbers equivalent to Santa Monica and New York, which are definitely our leading stores around the world, which is incredible.
Step On is really a go-to product now for our wholesalers in China and our direct business. Our wholesalers are close to 70% sold through. We are up with our wholesalers year over year at 40%, and the current plan for growth going into this upcoming sell in period is 50%-70% growth with our wholesalers. We’re growing in the triple digits online. We have big growth expectations, but it’s actually happening.
We saw some incredible numbers during Singles Day, which is the biggest shopping day in the world on Nov. 11. We weren’t set up a year ago, and this year we were ready to rock. We did $1.75 million for that shopping day. It’s just incredible.
China resorts are opening as we speak. They had a trade show recently. They’re in a bit of a post-COVID world. We had an amazing movie premiere in Shanghai, we had a Rail Jam during the trade show, just a lot of incredible excitement happening. We’re doing some cool collaborations that are very relevant to the influencers in that market. We’re getting momentum and getting ready as we think towards the Olympics in 2022, which will be in Beijing.
We’re the number one snow sport brand there. It’s great. It’s very similar to the 90s resurgence when snowboarding was running rampant. It’s running rampant in China right now.
Overall, your whole Hub strategy (combining retail store, showroom and office space) – are you guys are still happy with that?
John Lacy: It’s worked out great. It removes this channel conflict so that the team that manages the resorts, the wholesale, the digital, they also manage the store.
It seemed like the right time to do it. The wholesale market was challenging, flat or even down, and the reps couldn’t afford their business models, so we had to bring them in-house. I didn’t want them wasting time balancing their books when they needed to be out servicing customers. And I think that’s the biggest benefit and change. These are salaried employees. They’re here for the brand, and they don’t have to feel like, “Well, I have to make a difficult decision and sell the wrong product to the wrong dealer or liquidate something because I need more cashflow to pay my bills.”
Now there’s technology and tools so they can see how much they sold through the Burton store on a daily basis. Which styles? Which categories? And that’s an amazing tool to help their wholesale partners to see what’s working, what’s not. And it also helps us feel the pain of what it’s like to be a retailer. Retailing is difficult.
We want to offer an amazing experience like we used to at trade shows, that’s really been the vision when you walk into a Hub. Here’s all this great Burton stuff. The dealer may get inspired and say, “Wow, that’s really cool how you guys brought that category to life. Can you do that in my store?” Or we can share some of the nightmare stories and be like, “That didn’t work, and you don’t want to do that.”
What is your gut telling you how this season is going to go?
John Lacy: It’s a tough one. It’s gone really well and way beyond our expectations to date. We’re coming up on our big holiday season with the cyber week ahead of us.
But I do think the resort participation is going to be challenging. Whether you can get there is one thing, and then what capacity rates are. I think people will still do well in selling things. Consumers, when they show up at retail now, they show up with purpose. So there’s less of them, but when they come, they buy. And I feel the same with going to the mountains. There’s this pent-up desire.
I think we’re going to get new participants like surf and skate has seen. And then, our responsibility is, how do we retain them?
Even if a small percentage of the people that try it for the first time stick with it, that’s something our industry has needed for years.
It’s mind-boggling, John. The numbers that some retailers are telling me they’re doing, it’s insane.
John Lacy: It is. We’ve talked to retailers, they’re loaded with cash because of how many bikes and skateboards and things they sold. They’re like, “Can I get a discount if you just ship me everything and I pay you now?” Usually, cashflow is their number one problem. Inventory management is also a huge problem. Now, they are chasing inventory.
I wouldn’t bank on it being something that we can comp year over year, but as I mentioned, if even a small percentage find a connection to standing sideways, and falling in love with skateboarding, surfing and snowboarding – that presents a tidal wave of opportunity for our industry when we’ve been flat or down for the last 10 years.
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