West Marine Aquired

[Macrophylla]

The beauty of capitalism and the reason civilization is so much better off than we were 50, 100, and 1000 years ago is creative destruction.

If West Marine was well run, efficient, and profitable the acquisition cost would’ve been unattractive to PE. They aren’t and so they are an attractive candidate. Those same people you’re worried about are the people that made WM what it is today.

 

[BandB]

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.

No, they are not a highly profitable company. But they could become one.

 

[BandB]

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?

Sadly, new CEO's are hired, new owners come in, and so often the keyword is "CUT". They decide to cut expenses, to cut inventories, to cut employees. I've been termed a "contrarian." During the pandemic we added and were aggressive. You can never reduce any expenses enough to make West Marine successful. However, if you can increase revenues 5%, 10% or 20% you can make a major change.

Funny how you remember small lessons along the way. I was a kid, just starting, and we did a contingency budget, what if due to economic turns we found sales headed to 20% below budget. We increased the travel budget of the entire sales department from VP on down and we showed adding dollars to our closeouts department. Seems so logical. If sales are down you want people selling. Yet, what everyone traditionally would do was cut all travel expenses and all employee counts.

I've been asked before a formula for minimum inventories and people want to get analytical and base it on theory. Well, I have a theory I've long believed in, The Theory of Pain. When I start to feel pain, I've gone too far. Problem is companies like West Marine don't measure pain. The employees at the store level know but don't capture it. They have no measure of demand, not of true demand, because all they capture are orders taken, not orders not taken. Every time you're out of something, you may be missing sales. Barren shelves have killed more than one retailer. I assume that every time I have zero inventory of an item, I'm missing sales. If I'm out of a size, I'm missing sales. There is nothing that troubles me more than seeing 0 in an inventory level.

Yet, too often, those acquiring businesses are already so heavily leveraged by debt in the acquisition, they can't grow. They can't make capital improvements, they can't increase inventories or employees. Put simply, they can't succeed. So, they only shrink the business. Seems so illogical. Do they really believe with less inventory and fewer people, they're going to sell more? Why would you buy a $700 million a year company to turn it into a $500-$600 million a year company? My best guess of what the previous owners have done. I'd want to see West Marine at $1 billion.

West Marine had 311 stores in 2011, 263 stores in 2016 and now has 237 stores. Now, I would agree they needed and still need some consolidation and reduction of small stores, but then put stores in locations you don't have them.

The best defense is a good offense. Actually the oldest quote I can find is "offensive operations, often times, is the surest, if not the only means of defense." I must give credit. George Washington, 1799. A more recent quote, July 1, 2020 by Monica Oss in Open Minds is "In the midst of the current crisis, it may appear that defense is the best choice—hunkering down and waiting it out seems safe. But defense is not the only option. Crises often present opportunities but executive teams need to plan their offense. They need a plan for how to grow."

 

[drb1025]

Is success only about profits? Sadly it is for most PE. It would be nice to be a desirable employer, good neighbor, socially/environmentally conscious, and community supporter to start. That is longer term thinking that PE doesn’t engage in.

 

[twistedtree]

Sadly, new CEO's are hired, new owners come in, and so often the keyword is "CUT". They decide to cut expenses, to cut inventories, to cut employees. I've been termed a "contrarian." During the pandemic we added and were aggressive. You can never reduce any expenses enough to make West Marine successful. However, if you can increase revenues 5%, 10% or 20% you can make a major change.



/QUOTE]



I think actions like that happen because people are chasing short term goals, not trying to build a going concern.

New CEO gets hired and is goaled with increasing margin, or reducing losses, or returning to profitability. So guess what they do? Shortest path is to cut cut cut. Then you have hit your goal, get your bonus, and you can get your kids the Gi Joe with the king fu grip.

And for a public company, it will
be all about driving up the stock price. That’s what shareholders want, and that increases the value of your options. So the focus is on improving simplistic financials and constructing a story about streamlining efficiencies, eliminating redundancies, closing non-strategic stores, and other such corporate-speak BS. People buy it, stock goes up, shareholders and CEO make money, both move on before anyone realizes they have left behind a smoking crater.

Same also happen to dress up a company to take it public, in fact this is a pretty typical MO for PE firms. Roll up some companies, dress them up, tell a good story, take it public, make a bunch of $$, then move on. So what if it’s all a sham.

 

[Moby Nick]

I still vividly remember my first visit at age 10 to small marine supply store in South Bend, IN (not your typical Great Lakes or Coastal recreational boating area) with my father. We were restoring a derelict plywood dinghy I had found on the Touhy Av Beach in Chicago at age 5. Our objectives at the store were a quart of Interlux white paint and, two rudder pintles, a gudgeon, 10' of sail track and a dozen slides. The boat needed several other fittings, too, but we'd figured out how to source zinc-plated steel substitutes at an ordinary hardware store for less money. The marine store's idea of a merchandizing display was a copious spread of tarnished bronze boat hardware under the glass sales counter. I'd still like to shop at a store like that, were there any left. I've been in Hamilton's in Rockland, ME (bought a 10' oar there) and enjoyed that much more than any West Marine store.

 

[MYTraveler]

Same also happen to dress up a company to take it public, in fact this is a pretty typical MO for PE firms. Roll up some companies, dress them up, tell a good story, take it public, make a bunch of $$, then move on. So what if it’s all a sham.

If that were true, even most of the time, you could make a bunch of money by shorting.

 

[CaptTom]

I've been termed a "contrarian." During the pandemic we added and were aggressive. You can never reduce any expenses enough to make West Marine successful. However, if you can increase revenues 5%, 10% or 20% you can make a major change.

I wanted to quote your entire post, every word was spot on! But I'll comment on the above:

Why is it "contrarian" for CEOs and VC's to know the exact thing that EVERY customer knows? I guarantee you there's no customer saying "I wish they'd reduced their SKUs more" or "I wish West Marine would stock more "lifestyle" brands and less boating supplies." Yet, that's what the Brain Trust types they put in charge always come up with.

I think actions like that happen because people are chasing short term goals, not trying to build a going concern.

Again, exactly right. You get what you measure. Only measure short-term success, and you'll only have short-term success.

Surely this stuff doesn't require an ivy-league education.

 

[BandB]

Is success only about profits? Sadly it is for most PE. It would be nice to be a desirable employer, good neighbor, socially/environmentally conscious, and community supporter to start. That is longer term thinking that PE doesn’t engage in.

Yes, all are important but when you're not the owner and others are they will expect profits. Now, I believe that those other factors are key contributors to long term profitability.

 

[BandB]

I wanted to quote your entire post, every word was spot on! But I'll comment on the above:

Why is it "contrarian" for CEOs and VC's to know the exact thing that EVERY customer knows? I guarantee you there's no customer saying "I wish they'd reduced their SKUs more" or "I wish West Marine would stock more "lifestyle" brands and less boating supplies." Yet, that's what the Brain Trust types they put in charge always come up with.



Again, exactly right. You get what you measure. Only measure short-term success, and you'll only have short-term success.

Surely this stuff doesn't require an ivy-league education.

Japanese companies long ago commented on the short sightedness of U.S. Business. They found it odd that we rewarded executives based on short term stock appreciation or profits as they pointed out that those are often contrary to investing in research and making capital expenditures for long term success.

I admit to both professional and personal prejudice in saying the following, but if you want to see the right way to acquire and build companies, just look at Berkshire Hathaway. Just look at the success of their subsidiaries. https://www.berkshirehathaway.com/subs/sublinks.html

I believe and am hopeful LVMH has a similar philosophy. https://www.lvmh.com/houses/

 

[soin2la]

civilization is so much better off than we were 50, 100, and 1000 years ago is creative destruction.

How do you measure "better off"?
In many ways, I was much better off 50 years ago.

 

[Macrophylla]

How do you measure "better off"?
In many ways, I was much better off 50 years ago.

Every average and trend has its outliers, sorry to hear that you are one of them.

Although you are on a trawler forum, on a PC or phone with Internet access and are at least 71 years old.... so....

If you’re still feeling down in the dumps about life I strongly recommend The Rational Optimist by Matt Ridley. You can even get a free sample of the first couple of chapters in a couple of seconds without leaving your couch.

 

[DDW]

Been shopping at West Marine from the beginning - store #1.

One mistake the last PE made was moving stores away from marinas and into malls. For example the store on the waterfront an easy walk from all the Sausalito marinas moved across the freeway into a shabby strip mall, now a drive or a cab ride.

I'd agree on inventory, and add that they do not have to be the lowest priced vendor (and any any case have not been for decades). If they were within 10 or 15% of online, and you can walk out with what you need, that's where I will buy. Defender is great, but a lot of the time I can't wait a week for a part. They need a department that tracks competitors pricing, and a way to respond in less than a year.

 

[mvweebles]

PE #1 pivoted to be more of an outdoor apparel and gear retailer - REI competitor. This is a very different model than a marine chandlary. Retail management focuses on turning inventory. A chandlary could sit on inventory for years.

Given WM stores are now scattered in urban and suburban locations that are decoupled from marine centers, pivoting back will be difficult and costly. Don't hold your breath.

The discontent is that forums like TF have boating enthusiasts who want a chandlary with knowledgeable sales staff. Apparently, not enough of us to monetize into a national storefront.

Over the past 2 years, I've purchased tens of thousands of dollars in refit goods. Not a dime has gone to West Marine. I don't even think of them anymore. Defender is first, Hodges is decent too. Amazon has a lot. For quick need, I buy local from marine chandlary. West Marine has totally drifted from my mind.

Peter.

 

[Bill V]

When I bought my present boat in 2005 there were 4 boating supply stores in Bellingham, WA. Boaters World, WM, Reddens and LFS. BW left years ago, Reddens sold out to LFS and not one of the remaining stores has increased inventory. WM has less now, LFS has the same, maybe. I now buy 90% online, mostly from Defender and Hodges plus a good deal from Amazon. In 15 years I have spent well over $60k in bringing my boat from a $5k virtually abandoned boat to a boat that is first class in every area I need it to be. In the beginning I tried to buy local but the local stores wouldn't support me. WM is the very last store that comes to mind if I need a marine item, period.

 

[rslifkin]

To me, a local store like WM or a ship's store should be stocked with items that I either want to see / touch before buying, and items that I'm likely to need on short notice. So I don't mind part of the store going to foul weather gear and other clothing items not carried in standard clothing stores. And make sure you have plenty of hardware, hose clamps, wire connectors, line, etc. But don't waste much (if any) space on things like anchors. I'm pretty unlikely to need an anchor "right now", so taking a day or 2 to order it (either via a local store or online) isn't a big deal. But I'm much more likely to need some piece of hardware or something "right now" to avoid having to stop in the middle of a project, etc.

Realistically, other than an occasional online order when something is on a good sale, my biggest WM shopping of the year is the pre-winter antifreeze buying (it takes 6 cases to winterize everything on my boat).

 

[FWT]

1) What you see depends on where you are. The view over the horizon is only so far. In MD all boating was halted for a time last year due to covid. The boating season was pretty much killed. That had to be extraordinarily costly to anyone trying to sell marine gear. But that was MD. FL remained open of course, the exact opposite. The net impact of covid across the country on marine? No clue, but at least some impact.

2) The online / Amazon effect is hitting storefronts in all areas, including marine sales. Lots of comments here about buying from Defender, Amazon, et al. Every such sale is a sales dollar drained out of storefront retail. If the nostalgic tear in the eye appeal of the small local chandlery math worked, we'd see more of them. A local plumbing supply business near me just closed, and I know the owner. It was the equivalent of the marine chandlery. Locals loved it. But he was sourcing pumps for about the same price as what you buy online. He could not mark up his inventory to make a profit, and closed. Buyers would not pay him the premium no matter how much they liked doing business with him, and so he's now closed. That hit clothing retail many years ago. Another friend closed his family business of a dozen locations for men's clothing maybe 20 years ago or more when Walmart was selling some brands at his cost to buy. Best thing that ever happened to him, though, because he pivoted to commercial real estate development and now has a net worth in the high 9 figures or low 10, proving that when its time to go then go and don't look back.

3) Best Buy fought that fight years ago and found their path to continued existence. They do have to be ruthless about store locations. They are closing one store near me. Another larger one near me remains, and is in all respects the better and larger store with more inventory and selection, and better sales staff. The math may not work for lots of little WM stores. It may be a "go big or go home" situation.

 

[lwarden]

Well, the new CEO will have his/her work cut out for them.
One thing I think you need to keep in mind is you need a formula which is flexible in terms of stocking to match the area. I suspect they do that to some extent, but likely it needs to be stepped up. For example: I go to two stores, one in San Diego and one in Anacortes where my boat currently is.

San Diego store:
This store is located near many boat yards and marinas, yacht clubs, it's convenient and within walking distance if you like. It's a very large store, I believe the building was an old grocery store.
Store flooring it's designated about 25% of space for clothes. Although I see people looking at clothes I don't see many heading to the counter with anything. Unless clothing items are on sale there are better places to buy things. Same goes for shoes. I have bought some fowlies there before, but only when on sale. Markup on clothes is so high they could certainly lower these prices and have more folks heading to the register. Since there aren't many other places to go locally for specifically boating related clothes I'd keep them and drop prices 20% across the board.

Fishing gear: This inventory takes up 10% of flooring and no one buys anything there. We have very good tackle stores nearby. I'd cut all that inventory for this store.

General Chandlery: The stock is so-so, prices are ridiculous. There is a good chandlery even closer to the boat yards with very knowledgeable people (although closed on Sunday). I never buy chandlery materials at WM unless someone has a gun to my head. Prices would need to be reduced 30% and stock increased significantly for me to be interested, otherwise, it's Defender, Hodges, Amazon like everyone else. I don't know if WM could afford to floor all the additional stock needed to be a better chandlery.

For the Anacortes store, it's within walking distance, very convenient. There aren't many other marine stores nearby so they seem to sell general marine supplies across the board at that site. I suck it up and buy whatever I need there since I usually need it now and am thankful they are so convenient. But I still feel violated after leaving the store.

So, I post this to illustrate that no single formula for improving margin would work at every location. You would need to an analysis of each location and refine the approach based on that intel. Overall however, you are going to need to drop prices to get the average boater to shop there vs. online. And, as mentioned they need to have a better online experience with rapid delivery (hours not days) from another local store or localized distribution warehouse. This could work well for areas like SoCal. Think NAPA here or O-Riley's).

Lastly, I would actually double down on WM brands, but would do it differently. I'd start a West Marine Platinum line. This would be similar to the higher level of quality tools at Harbor Freight ( Bauer, Hercules, Icon, etc.). These would be designed and engineered to be better than the competitor at a the same price as the competition. And these items would carry a better warrantee as well, perhaps lifetime on some items. I could imagine things like hose nozzles, fresh and RW washdown pumps, bilge pumps, blowers, perhaps even coolers. If Harbor Freight can do it, why can't WM?

Bottom line is, the new CEO has their work cut out for them. If I were a board member or head of the PE firm I would structure the new CEO's compensation on longer term profitably and revenue and not short-term operating expense reduction.

 

[twistedtree]

PE #1 pivoted to be more of an outdoor apparel and gear retailer - REI competitor. This is a very different model than a marine chandlary. Retail management focuses on turning inventory. A chandlary could sit on inventory for years.

Given WM stores are now scattered in urban and suburban locations that are decoupled from marine centers, pivoting back will be difficult and costly. Don't hold your breath.

The discontent is that forums like TF have boating enthusiasts who want a chandlary with knowledgeable sales staff. Apparently, not enough of us to monetize into a national storefront.

Over the past 2 years, I've purchased tens of thousands of dollars in refit goods. Not a dime has gone to West Marine. I don't even think of them anymore. Defender is first, Hodges is decent too. Amazon has a lot. For quick need, I buy local from marine chandlary. West Marine has totally drifted from my mind.

Peter.

I think it was the CEO immediately prior to PE #1 who turned them into a "water lifestyle" store. He was a former Eddie Bauer or REI or some such exec. Given that vision, I can see locating stores in the areas where Range Rover owners shop, since that's who you are catering too. But that vision obviously failed.



I'm not sure what PE #1 did. Maybe a bit of moving it back to being a marine supply store, but I don't know because I never go to WM.


If they were a credible marine supply store, I think lots of us would revisit. But they certainly have a lot of rebuilding, restocking, relocating, and restaffing to do.


As for profitability, they have no excuse. There are countless high quality, well stocked, successful, brick and mortar marine supply stores that are successfully carrying good stocks of quality products, sold at competitive prices. Just what all of us are asking for, they deliver. Fisheries, Rose Marine, Hamilton, SeaMar, Defender, Jamestown. If they can run a successful store, so can WM.

 

[FoxtrotCharlie]

I worked in M&A for a while earlier in my finance career - Yep, everything will be the same after the merger! Not. But I must offer up a nice recent WM experience - ordered some bottom paint from them last month, online - good sale. Their branded paint (made by Pettit). Three gallons arrived, well packed with extra 'locks' on the lids, each gallon sealed in a strong plastic bag. One had ruptured, and the bag was loaded with paint, but none had leaked out. I took photos, and called WM. They immediately overnighted another gallon, based solely on my call. I was pleased with the customer service.

 

[ScottC]

I have not read through this entire thread. I just wanted to add a post to say I'm not surprised. I shopped at two West Marine stores on a number of occasions while visiting Florida in years past and I was disappointed at how disorganized things were. Prices not marked consistently; cannibalized displays and stock; display equipment not functioning; uninformed staff; disinterest in ordering repair parts, etc.

On a very general note, I can say Marine/Boating supplies is one (and perhaps the only) area where similar goods in Sweden are LESS expensive than in the States. The offering in the States is more extensive, however...

 

[CompuNerd]

In Seattle there are two regional stores that have successfully weathered the storms: Fisheries Supply and Dunn Lumber. If I had to guess, they've done it by being focused on the commercial clients and using the retail side to complement the commercial customers. Stocks are kept full, with a very good if not great selection. At Dunn, and I suspect at Fisheries, there are specific sales-desk staff, specific inventory staff, specific order-fulfillment staff. IMO the professionals know they may pay a little more, but not exorbitantly so, and get high-quality goods and services. Retail customers will ask the pros where to go, and the pros point to Dunn/ Fisheries. Marketing can't buy that word-of-mouth.



I think I'd hire BandB for a turnaround. I'd rather see a CEO trying hard to win than trying hard not to lose.

 

[SteveK]

Locally we have have a store called Steveston Marine, a chandlery that had everything in stock including odd stuff. I have shopped there for the past 45 years.

Then along came West Marine and set up a store to compete with them. I went there once? looked around and they did not have what I wanted, so off to SM.

Well, WM closed their doors a few years ago. Now that storefront is occupied by Steveston Marine and they closed down the original location. The stock in store appears to be a liquidation sale. The common items can be ordered for you. I have now had three bad experiences unheard of over 45 years.

Ding, ding, ding.
Someone may know, I suspect West Marine purchased our successful Steveston Marine, closed down the original location and sold the property. That would explain my experiences in the last 2 years, I had given them benefit of doubt thinking it was covid, but this started before that.

For anyone interested you can purchase from Binnacle out of Nova Scotia delivered for less than pickup locally from SM. Prompt delivery, no BS. A recent purchase delivery date was given, tracking checked showed delivery to be a week later, ok said nothing. Checked a day later and delivery schedule back to promised date, and it arrived on that date.

 

[koliver]

Locally we have have a store called Steveston Marine, a chandlery that had everything in stock including odd stuff. I have shopped there for the past 45 years.

Then along came West Marine and set up a store to compete with them. I went there once? looked around and they did not have what I wanted, so off to SM.

Well, WM closed their doors a few years ago. Now that storefront is occupied by Steveston Marine and they closed down the original location. The stock in store appears to be a liquidation sale. The common items can be ordered for you. I have now had three bad experiences unheard of over 45 years.

Ding, ding, ding.
Someone may know, I suspect West Marine purchased our successful Steveston Marine, closed down the original location and sold the property. That would explain my experiences in the last 2 years, I had given them benefit of doubt thinking it was covid, but this started before that.

For anyone interested you can purchase from Binnacle out of Nova Scotia delivered for less than pickup locally from SM. Prompt delivery, no BS. A recent purchase delivery date was given, tracking checked showed delivery to be a week later, ok said nothing. Checked a day later and delivery schedule back to promised date, and it arrived on that date.

Steve

No, I don't think the recent changes at Steveston are WM. WM made a decision to get out of Canada, after shutting several stores elsewhere in Canada.

I haven't shopped SM since moving to Saltspring, so was unaware of their recent problems. Whenever I did go into WM, I found SM had better selection and pricing.

 

[SteveK]

Steve

No, I don't think the recent changes at Steveston are WM. WM made a decision to get out of Canada, after shutting several stores elsewhere in Canada.

I haven't shopped SM since moving to Saltspring, so was unaware of their recent problems. Whenever I did go into WM, I found SM had better selection and pricing.

Yes, SM in the original location, not so much now, but with no WM hard to compare locally. I know I did not have to go online or look for other sources until after WM left town.
Mouat seemed less stocked selection wise last year, maybe just the new market trend.

 

[soin2la]

Steveston Marine and Hardware, establish in 1941, was on Moncton Street in Steveston for decades, catering to the commercial fleet and were always the go to chandler, save a couple of strictly commercial shops along Powell Street in Vancouver.

When the cannery closed in 1979 and the fishery dwindled, SM&H transitioned more into the recreational market. They expanded into Vancouver, Richmond and Langley, then in 2018 closed the 77 year old store in Steveston.

Recreational boaters can be a tough lot and cheap. They expect a chandler to have that one item they need twice in a lifetime to be sitting on a shelf when they walk in. Twice it's not there, they blame the retailer and go to other sources, now mainly on line.

Steveston M & H along with its main competitor, Poco Marine, gain most of their revenue from online sales and one can hardly blame them for not having that great inventory of SS nuts and bolts of yore.

Who remembers the dingy old store on Lonsdale (?) in North Van where, if you looked long enough, you would probably find a fire axe from a CPR steamship? Was that Martin Marine?

 

[koliver]

Steveston Marine and Hardware, establish in 1941, was on Moncton Street in Steveston for decades, catering to the commercial fleet and were always the go to chandler, save a couple of strictly commercial shops along Powell Street in Vancouver.

When the cannery closed in 1979 and the fishery dwindled, SM&H transitioned more into the recreational market. They expanded into Vancouver, Richmond and Langley, then in 2018 closed the 77 year old store in Steveston.

Recreational boaters can be a tough lot and cheap. They expect a chandler to have that one item they need twice in a lifetime to be sitting on a shelf when they walk in. Twice it's not there, they blame the retailer and go to other sources, now mainly on line.

Steveston M & H along with its main competitor, Poco Marine, gain most of their revenue from online sales and one can hardly blame them for not having that great inventory of SS nuts and bolts of yore.

Who remembers the dingy old store on Lonsdale (?) in North Van where, if you looked long enough, you would probably find a fire axe from a CPR steamship? Was that Martin Marine?

Thanks for the trip down memory lane.
I recall shopping Kitsilano Lumber, where you had to go to the back of the lumber yard to find the hardware for my Star in the early 70s, then they grew into Steveston Marine's Vancouver store.

Martin Marine is still around, though their move to new premises a few years ago cleared out all the oddball stuff.

Pierre, at Poco Marine, is the best welder I have ever found. He started out working out of the back of his pickup, then doing Stainless and Aluminum welding for local boat shops, before getting his own premises and growing into Poco Marine. My boat has lots of Pierre welding, the mast base, the mast, a strut to support the mast when folded back, supports for the swim grid, repaired oil cooler on the Port engine, braces for the davits, I am sure I have forgotten some. All I ever had to give him was a rough pencil sketch and he would create whatever I was asking for. When he did my swimgrid supports, he asked me to take the first one to the boat to check the fit. Naturally it was already perfect, so all 5 appeared the next time I saw him.
I wish him success in his on line retail business.