After a short-lived North American life, CoreUpt went into bankruptcy earlier this month. The French ski brand, which started selling direct to consumers in 2009, was distributed in North America since the 2011 season via The Soze Group in Canada.
But with a myriad of problems, CoreUpt reportedly owed its creditors too much money and went belly up before getting products made for the 2012-13 season.
Skiing Business caught up with Jay Taylor, the president of The Soze Group, to find out why a brand that’s gaining momentum was stopped abruptly.
So you guys sent cancellation orders to your retailers?
Yeah. We tried to guarantee our production using our own cash flow, but the guys at CoreUpt wanted a piece of the action in order to manage everything. The factory didn’t agree to the terms we were trying to get, and the deadline for a production run was June 1. It would have ended up costing too much money for the 2012-13 skis to be made.
In the end, we couldn’t get enough other countries on board to keep the brand going for this season.
Were you in a position to buy the company to keep it going?
The creditors own the brand name as well as the operational side of the business, but the two are separate entities. We tried to buy just the name, but they didn’t want to sell the two separately.
I think the creditors have about 1.2 million euros (about $1.5 million) invested, and they’re taking offers. It would have made sense to us if we could get it for 10 cents on the dollar, but they wanted 20 cents to 30 cents on the dollar. Beyond the acquisition cost, we would have needed to put another $1.5 million to $2 million back into the company to rejuvenate it.
We talked with the distributors in Sweden and in Norway about pitching in with us to buy it, but we couldn’t work out the details. The longer CoreUpt is in bankruptcy, though, the better our chances of buying it are because I imagine the owners would accept a lower bid. We’ll continue to watch it and wait for the right time-if there is one.
As the North American distributor, how does this impact you financially?
In terms of missed revenue, it’s about a $500,000 hit based on what orders were already placed and what we expected for reorders. Beyond that, we put in about $175,000 for samples, trade show and travel expenses, and other normal business costs.
Being a distributor, you’re a little removed from the inner workings of the parent company. So from that semi-outsider’s point of view, what do you see as the reason the brand went bankrupt?
I think there were multiple things that led to this. They had a pretty big athlete program to help drive sales, but I think it was too ambitious and cost too much money. They also spent quite a bit of money to increase sales. If done right, you can grow organically about 20 percent every year. But if you want to grow more than that, you need a bridge loan to cover the gap between your profit in one season and what you expect to spend the next. I think that hurt them too much.
Then there was the apparel side of the business. There was a flood in Thailand that wiped out their production, and they expected their direct-to-consumer sales to be bigger than they were. Despite planning to operate on a loss for a few years to develop the brand, they ultimately spent more money than they were collecting.
Did you see this coming?
We had some concerns when they started the apparel program. We were asking questions about how they planned to finance it, and we kept being told to not worry about it. Usually when you’re told to not worry about money, you should start worrying about money.
How much responsibility do you guys take?
We did everything we needed to do to put product on the wall and take orders. The only thing that we could have maybe done differently was to pay the parent company upfront for the orders we took, but nobody in their right mind would have done that. If we would have done that, and products weren’t delivered, we would have been screwed.
If the price is right and you buy the brand, what makes you think you can do things better?
We know what they did wrong, and I don’t think it will take that long to make CoreUpt profitable again. The brand is strong, the products are good, and we have the distribution channels in place. I don’t think it would cost too much to get the brand back on its feet.