LOS ANGELES — The notoriously insular action sports industry is giving Nike’s decision to acquire Hurley International the thumbs-up.
Last month, while Olympians in highly technical Swoosh-bearing garb were winning medals in Salt Lake City, Nike was working behind the scenes to reach the young, irreverent spectators whooping it up in the stands.
Under Nike’s ownership, industry veteran Bob Hurley, who founded the action-sports-lifestyle company three years ago, will continue to run the 150-person company from its Costa Mesa, Calif., headquarters. The brand is considered to have raised the fashion quotient of the surf/skate/snow category, which caters to consumers famous for rebuffing perceived encroaching efforts of big-box brands.
“If Bob’s involved, I’m sure they’ll treat the brand right,” said Ron Jon Surf Shop merchandising director Debbie Harvey, summarizing the sentiments of many.
Dick Baker, chief executive officer of Ocean Pacific Apparel Corp., said Nike’s investment “adds credibility to the surf industry” as a global market. Industry sources peg the purchase price just north of $100 million.
Revenues of Hurley have skyrocketed to $70 million, the same volume Bob Hurley reached when he held the license for surf brand Billabong USA in the late Nineties.
Now it seems boyish-looking Hurley, who sounds and acts like a prototypical laid-back surfer, has his eye on a bigger prize.
“I don’t think Nike would have been interested in Hurley unless they thought they could turn it into the next Quiksilver,” observed Mitch Kummetz, an analyst with A.G. Edwards & Sons. Kummetz said it would be relatively easy for Hurley to triple the business by tapping into strong youth markets in Japan and Europe and adding footwear. In that arena, Nike could provide significant help with sourcing.
Indeed, Hurley cited launching footwear and international expansion as top priorities.
“We have a clean plate, internationally,” Hurley said. “One of the beautiful things about this opportunity is we can expand while really controlling how we look and communicate.” OP’s Baker pointed out the predominant surf brands are global and that midsized labels like Hurley often get squeezed between big names with better margins and ultra-cool niche houses.
Although Hurley’s core customer is an active teen, Nike president of new business development Tom Clarke emphasized the deal was based on Hurley’s fashion-lifestyle strengths, rather than its affiliation to a certain sport.
“As a corporation, it gives us different ways of reaching new consumers without having to extend brands beyond what they stand for,” Clarke said.
Nike several times has tried to reach the skate/surf/snow customer without lasting success.
Kummetz said the strength of newer brands like Hurley and Volcom is precisely that “no one has been able to characterize them as skate or surf or snow, so right out of the box, they’ve been able to reach all those consumers.”
Hurley currently sells a young men’s line, Hurley Girlie junior apparel, Hurley to Bed girl’s sleepwear, Unmentionables innerwear and small accessories to a base of specialty boutiques and chains, with department stores accounting for less than 10 percent of sales. The plan is to keep U.S. distribution stable in the near term.
Tori Schwaner, a buyer at Hobie Sports in San Juan Capistrano, Calif., said she hopes Nike’s involvement will help Hurley lower prices on key items.
“With Quiksilver, we can build margin, and that makes a big difference,” Schwaner said.
In an industry where consumers often equate “corporate” with “uncool,” the brand’s key challenge is to remain relevant and still grow.
Several industry insiders privately wondered if Nike, a company whose revenues hit $9.5 billion last year, will have the patience to let $70 million Hurley grow organically — or if the brand will be pushed too far too fast. Hurley is aware of lingering concern.
“Generally, humans are scared of change. But Hurley is the same company today as it was yesterday,” he said.
Kummetz said many companies will study Hurley’s performance over the next several years.
“A lot of little skate and surf apparel companies will take notice. And if it goes well for Hurley, I think they’ll make themselves available,” said Kummetz. “At the same time, companies like Adidas and Reebok and maybe some big apparel companies will also watch this very closely.”