Surf Sale: Now Rip Curl Is on the Block

SYDNEY -- Hot on the heels of a takeover offer for Billabong, Australian surf-wear maker Rip Curl has put itself up for sale. The company that was founded in 1969 close to Victoria's iconic Bells Beach is hoping to realize a sale price of close to $400 million, although it's more likely the sale will realize $300 million.

According to a report in The Australian Financial Review, Rip Curl has suffered a decline in sales in recent times, much like its larger cousin, Billabong International (ASX: BBG.AX). With half of Rip Curl's sales coming from surf-wear shops in Australia, the brand has been hit hard by consumers increasingly reluctant to open their wallets. According to the company's accounts lodged with the Australian Securities and Investment Commission, half-year sales to June 30, 2011 fell to $8 million, compared with $15.5 million the previous year.

On top of selling to retailers worldwide, the company operates corporate stores, and it acquired 24 Rip Curl-branded and multibranded stores in 2012 in both Australia and South Africa. Unlike Quicksilver and Billabong, Rip Curl has opted to remain a private company and therefore hasn't expanded as aggressively as its larger rivals.

Fashion retailers have a difficult job at the best of times. You only have to look at the poor recent results from Premier Investments (ASX: PMV.AX) -- which owns brands such as Just Jeans, Jay Jays, Dotti, and Smiggle -- and Speciality Fashion Group (ASX: SFH.AX), operator of retailers Katies, Millers, and Crossroads. Likewise. Noni B Limited (ASX: NBL.AX) has been closing stores and undergoing a process of reinventing itself.

Competition from online sales and the high Australian dollar has meant that consumers can buy well-known, branded clothing and fashion accessories more cheaply from overseas retailers. In an effort to win back customers, local fashion stores are aiming to increase their Internet sales, and they're pulling out all the stops to draw consumers back into the traditional brick-and-mortar shops.

The Foolish bottom line
Rip Curl as a brand would certainly have some value to prospective buyers, and the timing appears interesting, given that private-equity groups have made recent competing bids for Billabong.

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Motley Fool writer/analyst Mike King doesn't own shares in any company mentioned. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, while it's still available. This article contains general investment advice only (under AFSL 400691). Authorized by Bruce Jackson.


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