[pct-l] Re: Mountain Hardware

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Some may find this interesting.

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>
>
>   Retail
> Can Columbia Sportswear Scale This Mountain?
> Stephane Fitch, 04.16.03, 7:00 AM ET
>
> CHICAGO - <A HREF=3D"http://www.forbes.com/finance/mktguideapps/personinf=
o/FromPersonIdPersonTearsheet.jhtml?passedPersonId=3D147941">Gertrude "Moth=
er" Boyle</A> is one 79-year-old who doesn't wish to
> stick to her knitting.
>
> Earlier this month, Boyle and her son, Timothy, 53, who run the highly
> profitable Portland, Ore.-based outdoors-wear maker Columbia Sportswear
> (nyse: <A HREF=3D"http://www.forbes.com/finance/mktguideapps/compinfo/Com=
panyTearsheet.jhtml?tkr=3DCOLM">COLM</A> - <A HREF=3D"http://www.forbes.com=
/markets/company_news.jhtml?ticker=3DCOLM">news </A>- <A HREF=3D"http://www=
.forbes.com/peopletracker/results.jhtml?startRow=3D0&name=3D&ticker=3DCOLM"=
>people </A>) bought Mountain Hardwear, a small maker of
> high-end climbing gear, for $36 million in cash and assumed debt. The deal
> may seem insignificant for $816 million-in-sales Columbia. But it's a maj=
or
> departure from Columbia's core business, and the biggest risk the Boyles
> have taken since their company went public in 1998.
>
>   More on Gertrude Boyle
>
>
> <A HREF=3D"http://www.forbes.com/finance/mktguideapps/personinfo/FromPers=
onIdPersonTearsheet.jhtml?passedPersonId=3D147941">Tear Sheet </A>
>
> <A HREF=3D"http://www.forbes.com/peopletracker/add_person.jhtml?successUR=
L=3D/peopletracker/protected/exec_tracker.jhtml&errorURL=3D/peopletracker/e=
rror.jhtml&personId=3D147941">Add to Tracker</A>
>
>
>   More on Columbia Sportswear
>   <A HREF=3D"http://www.forbes.com/finance/mktguideapps/compinfo/CompanyT=
earsheet.jhtml?tkr=3DCOLM">Tear Sheet </A>
>
>
>
>
> The customers of Columbia and Mountain Hardwear couldn't be more differen=
t=2E
> The Boyles have raked in mountains of cash (earnings were up 15% last year
> to $103 million) selling convincing knockoffs of serious outdoor clothing
> to people who get winded walking up stairs and who aren't nearly outdoorsy
> enough to tell the difference--which is to say, almost everybody. Columbia
> has had a hit advertising campaign based on the septuagenarian Mother Boy=
le
> testing its products on her son, Tim. REI, the Seattle-based outdoor
> retailer, sells a Columbia fleece jacket in five color choices on its
> popular Web site for $39. It's cut generously to allow for, say, a beer
> gut.
>
> Enter Mountain Hardwear, whose tents, sleeping bags and clothing are the
> best of the best. Serious mountaineers (in other words, precious few
> people) buy the stuff, which is too expensive for the rest of us. A
> Mountain Hardwear fleece jacket comes in just two colors, costs $120 and
> fits so tight that your bowling buddies may see the outline of your belly
> button.
>
> So where's that magic dust the investment bankers like to call "synergy"?=
 <A HREF=3D"http://www.forbes.com/finance/mktguideapps/personinfo/FromPerso=
nIdPersonTearsheet.jhtml?passedPersonId=3D194982">
> Tim Boyle</A>, who oversees Columbia's day-to-day management, admits he d=
oesn't
> see it at the customer level. Even Columbia's slightly more expensive and
> high-end Titanium line of outerwear, Boyle says, "is priced 20% below
> comparable Mountain Hardwear products."
>
> No matter. Boyle says the idea wasn't to eliminate a competitor to
> Columbia. Rather, he aims to leverage his muscle with retailers in the U.=
S=2E
> and Europe, and apparel makers in Asia, to boost Mountain Hardwear's
> fortunes. His goals: triple Mountain Hardwear's annual sales to $100
> million in five years and lift its operating margin to Columbia's 22% from
> its current level of roughly 10%.
>
> As Boyle tells it, Mountain Hardwear eventually would have reached $100
> million a year in sales on its own. High-volume outdoors retailers like
> REI, Erehwon, Galyan's Trading and Eastern Mountain Sports were pushing to
> get more gear from the company. But meeting the demand would have meant
> borrowing heavily against receivables, and Mountain Hardwear's managers
> refused to carry working capital greater than 25% of its $30 million in
> revenue. Now, backed by Columbia's balance sheet--the Boyles' are still
> sitting on more than $125 million in cash--Mountain Hardwear can expand
> more rapidly.
>
> Mountain Hardwear will also get use of Columbia's vast network of Asian
> textile suppliers to avoid onerous import and export fees. Columbia does
> business with 300 factories in 19 countries, mostly in and around Asia. At
> times, Boyle says, the import duties charged for, say, a pair of cotton
> shorts made in China and shipped to a retailer in France can be on the
> scale of $1 a pair--that's likely more than the cost of making them. So if
> Columbia sells khaki shorts in Paris, it has them sewn in Vietnam, as the
> French look more smilingly upon that country. The opposite may be true for
> shorts shipped to the U.S.
>
> Columbia should also be able to help Mountain Hardwear kick its quality
> control up a notch. Boyle has 500 employees in Asia keeping watch on his
> suppliers. Engineers at his Hong Kong development center take designs
> submitted to them from Portland and convert them into patterns that allow
> for highly efficient sewing. On-site product inspectors make sure the sea=
ms
> in jackets and vests are made right before they're shipped. (Columbia has
> not said whether its Asian operations would change due to the outbreak of
> severe acute respiratory syndrome.)
>
> Now this same network will handle all of Mountain Hardwear's gear. "They'=
ve
> got good quality now, but in apparel we think we can get Mountain Hardwear
> to higher quality levels," says Boyle.
>
> He insists all this can happen without any slip in Mountain Hardwear's
> commitment to creating the kind of gear that would have turned the first
> Everest ascent into a cakewalk. So the company's founders and designers
> will continue to work from offices in California and try to outmaneuver
> Marmot, Patagonia and The North Face, which is owned by VF (nyse: <A HREF=
=3D"http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jh=
tml?tkr=3DVFC">VFC</A> - <A HREF=3D"http://www.forbes.com/markets/company_n=
ews.jhtml?ticker=3DVFC">
> news </A>- <A HREF=3D"http://www.forbes.com/peopletracker/results.jhtml?s=
tartRow=3D0&name=3D&ticker=3DVFC">people </A>).
>
> Boyle also wants Mountain Hardwear's marketing to stay in Richmond, Calif=
.,
> with Jack Gilbert, Paul Kramer and Mike Wallenfels, who founded the compa=
ny
> in 1993. Mountaineering-gear buyers like to wear what the pros wear, and
> the founders have vital relationships with elite athletes like mountaineer
> Ed Viesturs and Sherpa Jamling Tenzing Norgay (both starred in the 1998
> Imax documentary, Everest). Perhaps more importantly, Mountain Hardwear's
> founders pull more weight with buyers at the specialty outdoors retailers
> than Columbia's own marketing crew could.
>
> Boyle gets it, even if he doesn't pretend to share their interests. "I'm a
> bird hunter. I used to be a big fly-fisher," he says. "Mostly, though, I
> play golf." No plans to send either Boyle to Everest soon to test Mountain
> Hardwear's jackets.
>