West Marine Aquired

[Bacchus]

To me West stepped on their own dick when they got greedy and went Port Supply. It seemed like, in order to offer discounts and delivery to the trade, they raised store prices opening the door again for local stores and even marinas after capturing all that business over the years by buying out or putting out of business most other sellers. Greed strikes again. Love it.

Port Supply pricing used to be attractive when they first started it but it has gotten worse over time. Discounts hardly worth the bother and don't come close to Defender commercial acct prices.

 

[Brooksie]

Port Supply pricing used to be attractive when they first started it but it has gotten worse over time. Discounts hardly worth the bother and don't come close to Defender commercial acct prices.

Look at the overhead they have compared to Defender or Kellogg plus they deliver. I represented a company for 20 years that wanted it all, wanted to sell direct, through distributors and finally online. They started out as the largest in the business and ended up an also ran. They bought competitors out time and again and could have used those names to sell other channels. But no, too vain, everything had to be under their name. They had it all and then nothing.
They all read the same book at Harvard Business School.

 

[BandB]

A couple of points. Port Supply has been changed to West Marine Professional. Over time, they've been deemphasized by the new owners (since 2017) and their incentives to professionals in the industry have been reduced. They probably only add a small profit, but they can enable West Marine to increase volume and get benefits from vendors if done correctly.

L Catterton is very different from the private equity firm selling West Marine. They're many times larger and they are owned by very successful and deep pocket companies themselves. They are capable of doing things the previous owners were not. What they will do is to be seen, but I do hold out hope that they'll take some positive and aggressive actions.

As to the Pandemic, I think West Marine failed miserably when they didn't have to. Hardware stores and Auto Parts stores had nice increases in business through aggressive pick up and delivery business.

The clothing was a failed experiment although I'm sure they were convinced higher margin items selling more per square foot would be a great move. It's not a good move when it leads to more outages on your base business and the number one criticism I hear of West Marine is the thin inventory levels. They for some reason believed that saying we'll have it tomorrow would be enough. Well, tomorrow, you can get it from anyone.

I believe West Marine can be successful. However, they really need some experts from Auto Parts and/or Hardware to guide them. Can't be run like clothing stores or jewelry stores or other retail. Most of L Catterton's current businesses are not at all similar to West Marine. One that is I believe, would be Leslie's Pool supplies.

Now, L Catterton normally could be expected to try to improve and flip in three to five years. However, since LVMH became a partner in L Catterton, I don't know if the philosophy will change. LVMH doesn't buy businesses just to flip them but invests to grow and profit.

I certainly have more hope for them this week than last. Still no way to know until they show us.

 

[GoneFarrell]

"and the number one criticism I hear of West Marine is the thin inventory levels."

B & B, totally agree. Before zincs, I was at WM in PDX for marine grade wire. Half the spools on the rack were bare or less than 10 feet of wire. Disappointing to say the least.

I know copper demand is way up, but they should be on top of this. Other shops got wire.

Bean counters that don't have boats are gonna kill this company.

 

[BandB]

"and the number one criticism I hear of West Marine is the thin inventory levels."

B & B, totally agree. Before zincs, I was at WM in PDX for marine grade wire. Half the spools on the rack were bare or less than 10 feet of wire. Disappointing to say the least.

I know copper demand is way up, but they should be on top of this. Other shops got wire.

Bean counters that don't have boats are gonna kill this company.

No, not bean counters, it's investors who don't know the business or don't have the money they're willing to spend to maximize the company.

 

[Brooksie]

Band.B, I agree completely. West could be saved but probably not by the group that owns them now.

 

[Alaskan Sea-Duction]

I tend to get my stuff at Fisheries now. The statement, we will have it tomorrow then 4 days later........

 

[BandB]

Band.B, I agree completely. West could be saved but probably not by the group that owns them now.

Why do you say that about L Catterton? They've saved some other sizable companies. Some they own now, some they resold. Definitely far more able than the previous owners.

 

[Easternshore]

We’ll save $

West marine’s prices were exorbitant, many times over 2x others prices, the service in My local wm non-existent and one needed to order most items. I’ve found most west marine labeled products were of a poorer quality vs a name brand and usually the same or higher price.

Not sorry to see them go!

 

[Takoradi]

I always laugh about the press releases that talk about a "merger of equals." I was directly involved in one of those years ago. Two banks, one with a very well-known name. They did a "merger of equals." The well-known name was retained. Everyone thought that the well-known bank took over the lesser-known bank.

Um, yeah, except that the CEO of the lesser-known bank became the CEO of the merged banks. The COO of the lesser-known bank became the COO of the merged banks. In fact, after the merger, about 3/4ths of the executive management were from the lesser-known bank. Board meetings were moved to the city of the lesser-known bank. The few executives that were retained from the well-known bank had their offices moved to the city of the lesser-known bank.

So, less of a take-over by the well-known bank and more of one by the lesser-known bank, and obviously not much of a "merger of equals," either.

I lived thru much of the telecom reorgs of the ‘90s at the same time I was working on my MBA. The text books said that early on, there are many very public announcements of placement of acquired Corp execs in the “new company”. And within 5 years, they and the entire middle mgmt structure of the acquired company are gone. And that’s EXACTLY how it worked out. These high level placements are just for show to smooth digestion of the acquired company.

 

[Bonedoc]

Corporate Speak



kthoennes- yes- can’t get enough of that corporate speak! Ugh!

Can we circle back on that Bob?

 

[CarlF]

Yea - L. Chatterton isn’t your typical PE firm playing financial engineering games. One thing’s for sure - life is not going to be “business as usual” for West employees. These guys are likely to make big changes - and spend the money to make it happen.

I doubt we’ll recognize the place in two years.

I didn’t know that they already own UK based Princess Yachts.

 

[MYTraveler]

I always laugh about the press releases that talk about a "merger of equals."

The "Big 8" CPA firms started merging in the 1980's. Since each had a distinct personality, the meshing of cultures always created stress. In particular, the merger of Price Waterhouse with Coopers & Lybrand was expected to create great angst, PW partners being known for their straight laced approach to everything and Coopers' the exact opposite. The inevitable conflict was summarized by a comment that I believe I read in the WSJ: The PW guys wear starched underwear, while the Coopers guys don't wear any underwear.

 

[BandB]

Yea - L. Chatterton isn’t your typical PE firm playing financial engineering games. One thing’s for sure - life is not going to be “business as usual” for West employees. These guys are likely to make big changes - and spend the money to make it happen.

I doubt we’ll recognize the place in two years.

I didn’t know that they already own UK based Princess Yachts.

Like so many others they have traditionally done a lot of buying and selling, often moving on from those investments. However, they've still held more than they sold and their own merger may move them more to the buy and hold side. For West's sake, I hope so.

As to business as usual, I hope not. I've been involved with acquisitions and observed many more and the biggest mistakes I've seen have all been around not making major changes. The concept of an acquisition says that Buyer believes the business is worth more to them than Seller believes it's worth to them. The only way this is true is for Buyer to plan on doing things differently. West was available because it's not been doing well. They need a shake up. I would hope one year from now, West employees will be talking about what a difference in how things are done. If they are not, then there will be a big problem.

 

[BandB]

The "Big 8" CPA firms started merging in the 1980's. Since each had a distinct personality, the meshing of cultures always created stress. In particular, the merger of Price Waterhouse with Coopers & Lybrand was expected to create great angst, PW partners being known for their straight laced approach to everything and Coopers' the exact opposite. The inevitable conflict was summarized by a comment that I believe I read in the WSJ: The PW guys wear starched underwear, while the Coopers guys don't wear any underwear.

And then there was the one Big 8 firm that would ultimately sign off on anything to keep a lucrative client happy. We were immediately skeptical of companies with Arthur Andersen as their auditors. They were one of the Big 5 and now there are only 4.

 

[MYTraveler]

And then there was the one Big 8 firm that would ultimately sign off on anything to keep a lucrative client happy.

Well, the unofficial marketing slogan of Touche Ross was "write off that loss with the help of Touche Ross."

 

[mikehar]

Private equity’s familiar game plan-cut staff, lower wages, take on lots of debt, soak the company for management fees, file bankruptcy, blame something other than short term greed and mismanagement.

This is *exactly* what is going to happen. For all of the free market folk out there, PE has had a horrible impact on the middle class. I am sad that WM is now controlled by these guys.

FWIW, I too love to hate on WM. But... I think the Anacortes store is pretty good. I liked the Friday Harbor store too when was around. Like any store, some of the people really know their stuff and some don't, but it was/is my goto store when I'm in Anacortes.

Fisheries in Seattle is pretty good, especially if you want some attitude with your cable.

 

[Nancy and Bud]

Coors, Golden,CO PARTNERED with Miller when they were bought out.

 

[MYTraveler]

Private equity’s familiar game plan-cut staff, lower wages, take on lots of debt, soak the company for management fees, file bankruptcy, blame something other than short term greed and mismanagement.

Not in the real world. Private equity adds value or their equity position takes a hit. West Marine had become tragically mismanaged. In this economy, lowering wages is not going to solve the problem except to the extent that employees are overpaid. Under present management, the company is doomed anyway. Better management is the only hope of continued employment that the employees have.

 

[mikehar]

Not in the real world. Private equity adds value or their equity position takes a hit. West Marine had become tragically mismanaged. In this economy, lowering wages is not going to solve the problem except to the extent that employees are overpaid. Under present management, the company is doomed anyway. Better management is the only hope of continued employment that the employees have.

PE adds value, but the way they do it is what most people take exception to. I have friends who have sold to PE and the experience is universally negative.

 

[BandB]

PE adds value, but the way they do it is what most people take exception to. I have friends who have sold to PE and the experience is universally negative.

I'm skeptical of most of private equity, but some actually improve companies. West has been owned by private equity just the kind not able to move aggressively forward.

 

[lwarden]

Just curious, for those of you who are commenting on West Marine and them not going the right direction, what would you do if you woke up tomorrow morning and were CEO of WM? What changes would you make? Maybe the PE company will read this thread and take notice (probably not but I still think it would be interesting).

 

[drb1025]

Restaurants Unlimited operated successfully for nearly 40 years before selling to a PE firm. Predictably they expanded by loading up on debt, eliminating jobs, sucking out fees, and filing bankruptcy only 12 years later. What I remember most about the debacle was the press release in Seattle where the company blamed the $15/hour wages for their financial problems rather than saddling the company with an untenable amount of debt, greed and mismanagement. Some people believed that sadly.

 

[kthoennes]

Well, for one, I'd generally lower prices. As it is now, I only use WM for those items I need right now - if the items are on the shelves at all. Anything else, I order online and wait, to avoid the big price markup. Seems to me for a lot of boaters, WM is the "need it now" store. Sure, high profit margin on the items that are sold and walk out the door, but for scale and profitability overall, I'd rather follow a Walmart business model than be the last resort, "only when I can't wait" store.

 

[BandB]

Just curious, for those of you who are commenting on West Marine and them not going the right direction, what would you do if you woke up tomorrow morning and were CEO of WM? What changes would you make? Maybe the PE company will read this thread and take notice (probably not but I still think it would be interesting).

1. I would pack the stores with inventory, increasing levels significantly, while also moving more inventory to the stores themselves rather than in distribution centers for next day delivery. Online orders even would be filled first from the stores. I would in general go with larger stores, as a few currently are. In 2016, they averaged about 9400 sq ft. I am sure with closures that number is now higher. I would take advantage immediately of store vacancies and I'd have a minimum size of around 20,000 sq ft with stores from 20,000 to 50,000 sq ft. The last information I had 76% of their stores were under 10,000 sq ft.

2. I would increase store personnel based on store size but also based on desire for greater sales. I would pay to attract knowledgeable and dedicated employees.

There are two words that come to mind on items 1 and 2. They are from Ace Hardware and they are "Place" as in "the Place" and "Helpful." I would establish the stores as the place to find boating supplies and as having helpful employees.

3. I would increase delivery capabilities from all the local stores. As to online orders, they'd be filled with delivery and pickup. Orders would be filled first from the nearest store with local store personnel handling your fulfillment. Second, that store would access inventories from other stores. When ordering online, you would have access to the inventory of every store, not just a couple of distribution centers. Inventory tracking systems would be greatly enhanced.

4. I would aggressively have sales with flyers throughout the year. A rewards program providing a discount, likely 5%. I would go after vendors for periodic specials to be used in these sales. I would built relationships. I would regularly provide reasons for people to come into the stores.

5. I would examine all elements of the business and compare very carefully with two other segments of retail, Auto Parts and Hardware. Gross Margins have been a long time problem but can't be addressed by increasing prices, must come from decreasing product costs and mix. As to the oft criticized move toward more product in the stores that is not parts but things like boating apparel. Adding things like that as well as things like paddleboards and kayaks and other peripheral products was never the mistake. The mistake was doing it at the expense of base products and supplies. You can't devote 2000 sq ft of an 8000 sq ft store to them. However, you can devote 10,000 sq ft of a 50,000 sq ft store or 4,000 of a 25,000 sq ft store. I'd also look at all products. For instance, I suspect paint and painting products should be increased in volume and I know they carry an excellent margin.

6. I would aggressively rebuild the Port Supply Business as a legitimate wholesale business supplying those in the industry. While the margins would be lower in the wholesale business, increasing it would allow one to gain position with vendors.

7. I would decrease emphasis on house brands and increase on name brands. The West Marine Brand of products carries no great value to it as the customer immediately thinks cheaper and lesser quality. Quality is essential to the business and you build that with the best brands.

8. I would have everything a boat owner needs. That would include tools and equipment. I'd be a complete resource.

9. I would line the coasts, the Great Lakes and the major inland rivers and major lakes with stores. In addition, I'd provide delivery to marinas but also provide transportation for those wanting to visit from marinas. I would build a strategy for each market. I look at South Florida as an example. It should be a model market. However, I see a hodgepodge of mostly small stores. I see a couple in strip centers not even close to the water. I see the one on Andrews and 84 though as a great store. There are 56 stores in Florida.

10. I'd reduce costs in ways completely not impacting customers. For instance, every light would be LED. Corporate would be downsized with management responsibility distributed. IT systems would be enhanced which would capture better sales data.

I am putting this together with limited access to information, but my approach would target reducing the outages of desired products to less than 5%. I don't think I need a store on every corner, but I think every store must have a full product inventory. Also, I see people from here running elsewhere to buy basic products. There is no reason a battery or motor oil should be less expensive at Autozone or Alliance or NAPA. West Marine far underperforms everyone in the hardware industry and everyone in the automotive aftermarket industry. It just shouldn't be that way.

 

[SteveK]

B&B, that is an excellent resume.
The only thing I would add is re-brand. The West Marine name has lost many customers, no point overcoming that too.

 

[Mike Holleman]

West Marine

West Marine was purchased several years ago by a private equity firm. So now another PEF is buying them. Don't read too much into this. Like them or not they are a highly profitable company.

 

[twistedtree]

Great comments from BandB. I've never done anything in retail other than shop, so can't really offer anything other than my own shopping habits. What BandB suggests would go a long, long way to bringing me back to WM as a shopper.


One of my top criteria for a visit to any store is the probability that I will come out with the item I'm looking for. I go to the places that are most likely to carry what I want, in a quality product, and at a reasonable price. When I am the most frustrated and annoyed with a store is when I walk out empty handed, or with only half of what I want. I feel like they have wasted my time. I walked out of WM empty handed too many times, so have just stopped going because I know it will be a waste of time. So all the suggestions around a broad product offering, good stocking levels, good quality products, and reasonable prices are key.


The sad thing is that's such a low bar. It's like raving over a contractor because they showed up when they said they would, completed a job on time, or charged what they said it would cost. But god I would love to have that contractor, wouldn't you?

 

[twistedtree]

West Marine was purchased several years ago by a private equity firm. So now another PEF is buying them. Don't read too much into this. Like them or not they are a highly profitable company.

I haven't followed them closely, but I think they have been consistently loosing money. PE #1 thought they could fix them, but gave up and sold them to PE #2. It sounds like PE #2 is better suited for the next try at fixing WM.

 

[Avalon36]

Too Funny and also very good. You may be on to something here. Would you like a partner?