I follow my wife's purchases very carefully.

No, I'm not a budget-obsessed husband looking to limit her spending. My intent is to learn what she's buying and where she's buying it so I can keep my finger on the pulse of retail success. Peter Lynch would be proud because, like him, I find my wife to be a great source of investment ideas.

She's a runner who had foot problems. After years of enduring pain and then wearing bulky orthotics, she wanted to find shoes that looked nice, but more importantly, supported her feet well. Her Teva Romero's did the trick, and that's how I came to bring Deckers Outdoor (NASDAQ:DECK) to the Motley Fool Hidden Gems community.

I was introduced to Big Dog Holdings (NASDAQ:BDOG) in a similar fashion when Teva eventually stopped making the Romero. My wife bought a pair of ECCOs at The Walking Company store in Greenville, S.C., and she hasn't been disappointed. The company is owned by Big Dog Holdings.

After doing a little research and watching the company scoop more stores out of bankruptcy, I got a chance to put Big Dog in my CAPS portfolio. My real portfolio has been suffering the opportunity cost ever since.

When I learned I would have a chance to speak to CEO Andy Feshbach in an interview, I jumped at the opportunity. I couldn't wait to pick his brain, to learn more about him and the company, and to pass it along to Fools like you.

A small workhorse
My list of questions sat in front of me as Andy and I greeted each other over the phone. I start off with, "Briefly describe Big Dog Holdings today." While I may not have come off as infinitely creative with that obvious question, it started the information flowing from Andy's brain to yours.

Big Dog Holdings operates two segments; Big Dogs and The Walking Company. If you haven't heard of the Big Dogs brand, I'm surprised. According to his research, Andy remarked, it's one of the most recognizable brands for its size -- $83 million in sales last year. Feshbach mentioned that while brands like Gymboree (NASDAQ:GYMB) and Columbia Sportswear (NASDAQ:COLM) may be larger, Big Dog continues to hold it own.

According to Feshbach, he and his partner Fred Kayne co-founded the company after purchasing the Big Dog brand out of bankruptcy for $3 million. (That "finding distressed companies" is a reoccurring theme at Big Dog Holdings.) Back in the 1990s, outlet malls were the hottest distribution channel going. So with an eclectic brand, some cool clothing designs, and outlet malls popping up everywhere, Andy and Fred turned the troubled company into a healthy, profitable one.

You can't stand still
Then the world changed.

Strip malls, anchored by big stores from Gap (NYSE:GPS) and others, started pulling people away from the outlet malls. Since 2001, Big Dog revenues have declined. Is Andy worried? If he is, he really didn't let on that he was. That's because he sees Big Dog as a mature brand whose distribution channels are changing. Traffic isn't growing at outlet malls, so he's closing down stores as leases expire. That way, he can continue to market and sell Big Dog apparel while slowly moving away from an outlet mall sales distribution model to the next one that evolves, which, when I asked, could be more of a product-based model selling to retail partners. After all, the brand has a strong identity.

What's does this mean going forward? Well, it means that the company won't be sending much capital Big Dog's way, outside of marketing and brand-building expenses. That's because I don't see them opening any new stores in outlet malls and because The Walking Company, which we'll get to in the next article, needs capital to fund its expansion.

No respect from the market
EBITDA at The Walking Company segment is growing fast -- 29% last year -- and the market is essentially assigning no value to the Big Dog brand based on declining sales and just about break-even EBITDA. As Andy said above, the brand still has value even if the retail side of things is declining. How can Andy unlock that value for shareholders? Here's an idea.

Maybe selling the brand to a company like Cherokee (NASDAQ:CHKE) is one way. Then Cherokee could use its relationship with a retailer like Target (NYSE:TGT) to get apparel and accessories to a wider audience. There's already a network of suppliers in place with the right capabilities to generate the clothes. That way, Cherokee could generate licensing fees, Target could get access to another good brand, and Big Dog Holdings could monetize the asset and reallocate that capital toward building The Walking Company.

Sounds like a win-win-win situation. Where's my consulting fee?

It's just an idea and an example showing that, while the market doesn't seem to be assigning much value to the Big Dog segment, it still has some value. But The Walking Company is future of Andy's company and we'll go through our conversation about it next.

For more on the companies mentioned, check out:

While not all small companies turn into big ones, small companies can be great opportunities. At Motley Fool Hidden Gems, Tom Gardner and Bill Mann search for those underappreciated companies. And given their performance, they've found plenty. To learn more, come take a free 30-day trial.

Columbia Sportswear is a Motley Fool Hidden Gems recommendation. Gap is both an Inside Value and a Stock Advisor selection.

Retail editor David Meier can't wait for the next company his wife turns up. He does not own shares in any of the companies mentioned. The Motley Fool has a disclosure policy.