Editor's note: Updated with additional information about Sector 9 from ActionWatch.
Billabong announced today that it has sold Sector 9 for $12 million to Bravo Sports, which also owns the brands Pro Tec, Kryptonics, Ten-Eighty and Maple.
CEO Neil Fiske may have foreshadowed that the sale of Sector 9 might be on the horizon during Billabong’s half-year earnings report in February.
A steep decline in Sector 9 sales was called out as one reason for Billabong’s poor results in the Americas region for the six months ended Dec. 31, with EBITDA at Sector 9 declining by $A2.5 million.
The decline wasn’t because Sector 9 was doing something wrong, but rather the cyclical nature of the skateboard market. Longboards, which Sector 9 is the leader in, were once hot, but now the market has slowed.
Compounding the problem is the fact that the brand does a big business with some of the action sports chains, which as a group are struggling and ordering very conservatively, Neil told SES in an interview in February.
Billabong acquired Sector 9 in 2008 under a previous management regime.
Since he became CEO, Neil and his new team have been focused on improving the performance of the company’s largest brands – Billabong, RVCA and Element.
In February, he told us that the company would begin to “take a hard look” at its portfolio of smaller brands and determine which ones were holding their own and which ones weren’t.
We have heard from people with knowledge of the situation that some other brands in the portfolio are for sale.
I asked Billabong Spokesman Chris Fogarty that question today after the Sector 9 news came out.
Fogarty said, “Since the outset of the strategy, we've had various parties globally show interest in particular brands or assets and that continues.
“We remain consistent in our message here as to our approach. We treat each brand in our portfolio individually – based on its size, strategic fit, growth profile, profitability, and opportunity to contribute to our long-term success.
“In this particular case, we felt Sector 9 was a better fit for another company, giving us a chance to further narrow our focus.”
While Billabong sold Sector 9 for $12 million, it is unknown how much the company paid for the brand in 2008 because the purchase price was never publicly disclosed.
What is known is that Sector 9 has a great team of very loyal employees who are very passionate about the brand.
While they are the clear leader in longboard completes - Sector 9 has nearly twice the market share of its nearest competitor - it has been a very tough market, according to Cary Allington of ActionWatch.
Sales of longboards are down 18% so far this year vs. the same period last year on the ActionWatch Retail panel. In 2015, sales of longboards declined 4% on the panel.
Other smaller brands in Billabong’s portfolio include VonZipper, Xcel, Honolua, Kustom, Palmers Surf and Tigerlily.