Bauer and Easton in financial trouble

[sureLoss]

http://www.thehockeynews.com/blog/sh...inancial-woes/

The company that owns the world’s largest manufacturer of hockey equipment is the subject of at least one class-action lawsuit, saw its chief executive officer resign earlier this week and has witnessed a drop in stock price of about 90 percent during the past nine months.

Performance Sports Group CEO Kevin Davis resigned from the company that owns both the Bauer and Easton hockey brands after allegations surfaced that the company had misstated revenues and misled shareholders. It represents the end of a contentious relationship between Davis and former Bauer chairman Graeme Roustan, the company’s largest individual shareholder. Roustan has been trying for the better part of a year to have Davis removed from his post.

“I have been calling on the removal of the CEO for months and now that he is gone, I am calling on chairman Bernard McDonell to tender his resignation immediately,” Roustan said. “I would consider returning as chairman of the board to try and put the company back on its tracks if certain demands were met.”

A few days before his resignation, while attending a retail conference, Davis denied any wrongdoing. “We do not manipulate our earnings,” he said in a story posted by the New York Post. “We stand by our business practices.”
Roustan also took issue with Bauer’s decision to launch its “Own the Moment” strategy in which the company announced plans to open nine retail stores across North America, stores that would compete directly with the company’s retailers in those markets and offer products at a lower cost. This, Roustan claims, upset a number of large retailers who threatened to scale back their Bauer and Easton inventory and increase those of competitors. In January of this year, Bauer announced its sales were down 19 percent, while rival CCM reported an 18 percent increase in sales.

The company has retail stores in New York and Minneapolis and there were plans to open stores in Chicago and Toronto. But the company recently announced it would not put any capital expenditures into retail stores until at least May 31, 2017. At a meeting last June with the board of directors, which includes Edmonton Oilers president Bob Nicholson, Roustan said in a media release that he pleaded with the board to “reverse (its) Bauer retail store strategy,” but, “I was unable to convince them that retail partners would likely react negatively to the abrupt change in business strategy and reduce their purchase of Bauer, Easton and Cascade products.”

The price of stock in the company dropped quickly and dramatically, going from a high of $22 (U.S) last June to its current value of about $3.50. When the company revised its quarterly earnings forecast two weeks ago and said they would be down by about 31 percent, the stock price went from $8.95 to $2.95 in a matter of hours. It’s believed investors have lost in excess of $400 million with the drop in price of the stock.

Roustan said his lawyers have been contacted by 11 law firms that have filed class-action lawsuits against the company, alleging that it misled shareholders of the company’s financial problems. One of the lawsuits alleges the company, “made materially false and misleading statements and omitted materially adverse facts about the company’s business operations and prospects. As a result, the defendants’ alleged false and misleading statements, the company’s stock traded at artificially high prices.”

[jayswin]

Wow, I hadn't heard any of that. Easton's always been a found nostalgia memory for me. Their aluminum/composite two pieces owned by the kids with wealthier parents were always a source of envy for the rest of us.

The Wayne Gretzky style silver aluminum being the Ferrari of eastons.



Then as an adult I fell in love with the original Stealth composite. It was the pinnacle of hockey stick progression, imo. Just perfect weight and thickness, every stick I've tried since is too thin, including later versions of the Stealth.

The squared dimension of the shaft compared to the rounded ones made it way more natural to hold as well, it just sat in your gloves better as opposed to rolling on you a little with the more common rounded models.

This baby here.

[Resolute 14]

Brutally incompetent management will do that to you.

[browna]

The company has retail stores in New York and Minneapolis and there were plans to open stores in Chicago and Toronto. But the company recently announced it would not put any capital expenditures into retail stores until at least May 31, 2017. At a meeting last June with the board of directors, which includes Edmonton Oilers president Bob Nicholson, Roustan said in a media release that he pleaded with the board to “reverse (its) Bauer retail store strategy,” but, “I was unable to convince them that retail partners would likely react negatively to the abrupt change in business strategy and reduce their purchase of Bauer, Easton and Cascade products.”

The price of stock in the company dropped quickly and dramatically, going from a high of $22 (U.S) last June to its current value of about $3.50. When the company revised its quarterly earnings forecast two weeks ago and said they would be down by about 31 percent, the stock price went from $8.95 to $2.95 in a matter of hours. It’s believed investors have lost in excess of $400 million with the drop in price of the stock.

Well that's unsurprising, knew there had to be an Oiler connection on a massive failure story.

What has Nicholson done up there? Zero. Worse than zero. Another person who lives on their past reputation and assumed that he could (and that the Oilers in charge that hired him) just step in and turn the Oilers in to Hockey Canada. Problem is, funds aren't unlimited in Edmonton, and results matter in judging your job as President.

For his many faults, at least Lowe did something as a player and jumped his way up, whereas Nicholson won an election and then by default was the one that the media and large corporate sponsors had to gladhand to get a part of the national and Olympic team profit pie the last decade and a half before he left.

[Poe969]

See what happens when you stop making sticks for Johnny...

[Northendzone]

a couple of things in this article surprised me:

1. i did not know bauer and easton were owned by the same conglomerate
2. more bauer retail stores in the US than canada

[billybob123]

The Bauer-Easton link was interesting to me as well. Similarly, I recently learned that CCM and Reebok are the same parent as well. Who's left as independent? Warrior?

[iggyformayor]

Warrior is owned by New Balance, not that they're really competing with each other in the hockey market.

[CroFlames]

Originally Posted by jayswin

The squared dimension of the shaft compared to the rounded ones made it way more natural to hold as well, it just sat in your gloves better as opposed to rolling on you a little with the more common rounded models.

OMG this so much. The Stealth was my favorite all time, in large part due to the squareness of the shaft.

[sureLoss]

Parent company is expected to file for bankruptcy protection as soon as Monday.

http://www.tsn.ca/bankruptcy-may-end...stars-1.596122

PSG’s insolvency would be bad news for both NHL players and their agents.
Ovechkin, Toews and Kane each have deals worth between $300,000 and $500,000 per year for their endorsement contracts, a source close to Bauer said, while less established players such as Auston Matthews can have contracts valued at $200,000 annually.

Endorsement deals are similarly big business for NHL player agents. While agents typically charge players two to four per cent for negotiating a contract with a team, the fee can be as much as 40 per cent for helping land endorsement and sponsor deals, a person familiar with the matter told TSN.

“A bankruptcy judge can simply cancel those endorsement contracts and list the players as creditors, as easy as that,” the person said. “Bauer may simply not be in a position to be able to afford to pay those contracts.”

[Strange Brew]

Deciding to directly compete with your retail partners is a losing strategy and result is as expected. Brands like Nike, Disney can get away with it.

[IgiTang]

Did Nike not have something to do with bauer as well? Why do I recall the brand Nike-Bauer?

[dustygoon]

Nike sold Bauer. And ditched golf products. Losing sports authority as a retailer in the US has hurt Easton.

The debtor can go through its contracts and leases and reject unprofitable or unfavorable ones. If they reject a contract, then the player in this case can become a creditor. I guess it comes down to if the company feels the endorsements are valuable or not. Fairfax has indicated they would pay 575m for the assets which I think more than covers the existing debt and would likely cover these contracts to some extent if the company chose to reject the contracts. Then the new owners would likely want to strike new endorsement deals. Not the end of the world at first glance.

[kermitology]

More news on this:

http://www.theglobeandmail.com/repor...ticle32588735/

I could see Fairfax make a play to get more ownership of Bauer and use it to start their own hockey shop to compete with Sport Chek (PHL), better opportunity for revenue if you're controlling the supply chain and sale to consumer, and they recently hired the COO from FGL Sports, which may result in a new Sport Chek competitor in the retail space.

[CroFlames]

It's hard to imagine these companies losing money given the astronomical prices of new gear.

[rain_e]

Originally Posted by CroFlames

It's hard to imagine these companies losing money given the astronomical prices of new gear.

Definitely large margins but they spend a lot on advertising/endorsements to sell the product.

[Strange Brew]

Originally Posted by rain_e

Definitely large margins but they spend a lot on advertising/endorsements to sell the product.

It's a lot like golf equipment that way. Huge marketing spend to push relatively minor modifications to products, billed as "technological breakthroughs". It's really unfortunate for hockey as it drives away youth participation because of the costs.

Unlike say basketball which requires a good pair of shoes that kids want to wear anyway.

[redsunsdriver]

when's the bankruptcy sale? I could use an APX2

[SeeGeeWhy]

GRAF canada also went insolvent earlier this year. Filed notice in May, Auction was in July.

[Weitz]

They filed for chapter 11. Won't likely be a "bankruptcy" sale. More of a reorganization of debt.