Surfwear Maker’s Delicate Maneuver
It was the last night of its annual conference, and the Tribe, as the surf industry calls itself, was stoked.
Clothing makers, sales directors, marketing experts and shop owners gathered on the beach for an awards ceremony. When Volcom Inc. of Costa Mesa was named manufacturer of the year, supporters chanted “Wool-y, Wool-y” as pals carried the company’s chief executive to the stage.
Richard Woolcott acknowledged his father -- who provided $5,000 to help launch the business in 1991 -- with a “Right on, Dad.” He mentioned the relief of being able to call Quiksilver Inc. Chief Executive Robert B. McKnight Jr., a mentor and former boss, whenever he needs to talk.
“He knows what I’m going through right now,” said Woolcott, whose company recently filed to go public, hoping to raise $86 million in a stock offering.
Then, in an awards ceremony ritual, he took a slug of tequila.
These may be stressful times for the 39-year-old executive -- who with colleagues has nourished that seed money into a $113-million-a-year apparel company -- but he seemed to be having a good time at the gathering last month in Los Cabos, Mexico.
Indeed, the Surf Industry Manufacturers Assn. conference, sandwiched as it was between rounds of surfing and partying, gave Woolcott a chance to whoop it up before his company begins the stodgy “road show” it must endure to prove its worthiness to large investors.
Volcom’s rebellious image, with its “youth against establishment” mantra, has served it well among surfers, skateboarders, snowboarders and other mostly young shoppers in 40 countries. The offbeat mind-set is reflected in the clothing, which may have slanted seams, a crooked version of its stone logo or an upside-down word in the label.
Friends say the company’s creativity stems from Woolcott, by all accounts a regular guy who is unfazed by his success. Sure, he pulled down nearly $487,000 in salary and bonus last year, but the former competitive surfer still lives in a Laguna Beach mobile home park -- albeit one with an ocean view.
Woolcott, who has long dodged the mainstream press, couldn’t talk now if he wanted to, as Volcom must observe the pre-offering “quiet period” during which public comment is prohibited. From the start, he has preferred to communicate through less traditional channels.
The company’s guerrilla marketing tactics and quirky antics have become industry lore.
“They’re pretty much the masters of getting something for nothing in the marketing world,” said Mike Bill, vice president of e-commerce for Becker Surf & Sport, a five-store chain based in Hermosa Beach.
At trade shows, Volcom employees may show up dressed as clowns or even bananas. They once staged a fake breakdown of the company’s recreational vehicle, which was emblazoned with its logo, during a surfing contest in Huntington Beach to call attention to themselves, Bill said. During an event at retailer Surfside Sports in Newport Beach, anyone willing to kiss a dead carp got a free Volcom T-shirt, store owner Duke Edukas said.
“You’ve got to get it to be part of it,” he explained.
The kids get it. But will Wall Street?
Quite likely, say longtime surf industry watchers and experts on initial public offerings.
Volcom is growing faster than Quiksilver was when it went public, said Walter Cruttenden, whose former securities firm Cruttenden Roth handled Quiksilver’s offering in 1986. Volcom is also “edgier,” which plays well with youth, he said.
“Boy, right now I’d say anything Quiksilver has done it looks like Volcom could do,” said Cruttenden, now a director at IPO research firm Current Offerings in Newport Beach.
The stock sale also ratchets up the pressure on the easygoing Woolcott, whose business will face increased scrutiny as a Nasdaq-listed company.
Last week, Volcom filed documents disclosing that Chairman Rene Woolcott, Richard’s father, settled insider-trading allegations 30 years ago involving a sum of $6,500. The elder Woolcott neither admitted nor denied the allegations, according to the Securities and Exchange Commission filing.
To scale its next hurdle, Volcom must persuade investors that it can maintain the rapid growth that caused its sales to nearly double from 2002 to 2004.
But at the industry conference last month in Mexico, Richard Woolcott didn’t have to prove anything to anybody. There, he was surrounded by “the brethren,” to use McKnight’s term, some of whom were about as eager to grab Volcom stock as they were to catch the next wave.
“Everybody’s excited to buy” shares, said Jessica Rush, a spokeswoman for competitor Ezekiel USA, echoing the supportive buzz about Volcom.
Although fiercely competitive, the surf and skate apparel industry has been banding together in recent years as it frets over significant changes.
The old guard is graying -- guys like McKnight, 51, who once sold surf trunks from his car and today runs a $1.3-billion-a-year company. Armies of outsiders are encroaching, luring customers with beach-themed stores, such as Abercrombie & Fitch Co.'s Hollister chain, or snatching up brands, as when Nike Inc. bought Hurley International three years ago.
Almost in spite of itself, the Southern California-based industry is, well, growing up.
“Don’t say ‘maturing,’ ” admonished Fernando Aguerre, co-founder of San Diego sandal maker Reef Holdings Corp., grimacing at the word’s weighty implications.
Like it or not, Woolcott himself might find that word being attached to his name these days. At Los Cabos, even while immersed in the Tribe, he was preparing to paddle beyond it.
On the first day of the conference, he scribbled notes as Guy Kawasaki unveiled his “Rules for Revolutionaries.” The former “brand evangelist” for Apple Computer Inc. urged companies toward boldness, risk taking and -- to some degree -- practicality.
If you make shoes for teenagers and 50-year-olds start buying them, what should you do? “Take the money,” Kawasaki said, answering his own question.
The next day, Woolcott sat up straight as Yvon Chouinard, founder of privately held Patagonia, described the prospect of going public as a grind.
“As soon as you go public you have to grow and grow and grow,” said Chouinard, whose Ventura-based company makes outdoor apparel. “I don’t want to be on that treadmill.”
Treadmills don’t suit Woolcott, a snowboarder who won a local surfing contest as recently as last month. He began surfing early, riding the waves of Newport Beach while his grandmother cheered from the shore, said Carol Nielsen, whose husband coached Woolcott when he was on the Corona del Mar High School surfing team.
As the teenage Woolcott’s surfing skills improved, Quiksilver took him on as one of its sponsored athletes. Later, the company hired him to work in its marketing and promotional departments.
As Quiksilver grew, Woolcott sensed opportunity, figuring that there would soon be room in the market for a cool new brand, said T.K. Brimer, owner of the Frog House, a surfboard shop in Newport Beach. So in 1991, Woolcott and Tucker Hall -- who no longer works for the company but still owns a stake -- incorporated under the name Stone Boardwear Inc.
At the start, the partners didn’t have any product, Brimer said, so they cranked out stickers bearing a stone logo and the name “Volcom,” whose precise origins remain somewhat murky 14 years after the fact.
Soon, kids were clamoring for stuff that didn’t exist.
“He established a buzz about the product before there was ever a product,” said Brimer, whose shop would become Volcom’s first retail account. “It was the most effective preemptive advertising campaign I’ve ever observed firsthand.”
When Volcom actually delivered its first shorts and swim trunks to Frog House, they “sold like crazy,” Brimer recalled.
Edukas at Surfside Sports also caught Volcom’s first wave. In the mid-1990s, he recalled, he had a visitor -- Rene Woolcott, chairman and president of investment firm Clarendon House Advisors Ltd.
“ ‘So where’s Richard’s stuff?’ ” Edukas remembered the elder Woolcott asking as he strolled into the shop. “He says, ‘This stuff really sells that well?’ ... ‘Do you think he can make this thing happen?’ ”
“It’s already happening,” Edukas responded.
Through the years, the company rolled out more products, including a Volcom Girls line that was named women’s brand of the year at Surf Summit. Its products are sold in about 2,900 stores in the United States, including its own shop on La Brea Avenue in Los Angeles, where a pair of jeans costs $90 and T-shirts go for $20.
Last year Volcom’s profit climbed to $24.6 million, a 72% jump from 2003 and more than triple that of 2002.
Retailers say the company ships what they order, on time.
“It appears like it’s chaos over there, but it’s very controlled and very intelligent chaos,” said Dave Hollander, owner of Becker Surf & Sport.
Despite its strong track record, Volcom must face challenges that have humbled other rapidly growing companies. One key: maintaining cachet as it tries to ring up more cash.
“They should stay underground,” said Freddy Salguero, 19, a Los Angeles student who checked out Volcom’s La Brea store for the first time recently. Going public makes a brand “commercialized,” he said.
But Cody Reed is not bothered by the prospect of Volcom’s getting bigger. The 14-year-old Fullerton resident is such a fan of the brand, which he began wearing in elementary school, that he saved the first shirt he owned.
“That would be cool, to be a really big company,” he said. “Then I could say I used to wear their clothing when they weren’t that big.”