West Marine acquired

Long predicted. Normally private equity scares me, but in this case, their present situation scared me more. Catterton is relatively good as private equity goes so there is hope. Still likely to mean debt attached to the business and the impact of that. Most of their investments are relatively small as venture capital goes but they have a lot of them. Of course, like most, they'll always be looking at the potential sale down the road.

Still, having seen absolutely nothing good from Monomoy, I consider this a positive. Only way they can go is up.

A little additional information. While Catterton's investments have generally not been huge, L Catterton is owned by LVMH (Louis Vuitton Moet Hennessy) and Groupe Arnault so potentially very deep pockets behind them.

I’m always curious when PE sells to PE. Usually the first already leveraged up the company as much as possible so a lot less potential for the second. Either they try to IPO it or usually take a loss on the investment from experience.

In this case there's a huge difference between the two PE's. Monomoy currently has 11 investments. L Catterton has 67 majority ownerships and 46 venture or minority investments. Monomoy tends to turn over investments quicker. Monomoy has $2 billion in assets under management and L Catterton has $25 billion.

I think West Marine has hurt themselves badly in the wholesale business. Port has declined as it became West Professional. Many have turned away due to lesser professional discounts than others offer and availability of product has been a problem.

I'm hoping the new owners will look carefully at inventory practices and at the relationship of wholesale to retail. West is primarily a retailer. However, wholesale can provide significant additional dollars without a huge labor cost and can if properly done help on the retail side by increasing volumes, available inventories, and creating the opportunity for improved costs on what they're buying and some special deals.

West Marine is only successful as a retailing due to their size alone. And if they were wildly successful, they wouldn't keep getting shuffled from PE to PE. The problem with West Marine is they forgot that they're a boating store. They've devoted 1/2 of their floor space to clothing which is more profitable per SQ foot than boating parts, but then their boating parts shelves are always mostly empty with no inventory. The key component they forgot completely, is the entire reason they sell clothing, is from people going to West Marine to buy BOAT PARTS, and they happen to buy clothing at the same time because they're already there. Nobody makes a special trip to West Marine just to go clothes shopping. Their inventory even at their main store and warehouse has been horrid and out of many products, even long before Covid.

Also their West Marine PRO tiered discount is counter-intuitive for a reseller to even use them as their main supplier. On top of that, 1/2 of their items at the top tier are considerably pricier than elsewhere.....things such as Groco sea strainer items, baskets, lids, strainers, etc......Plus they miss the 50' and over market and stock no 24V items in any of their satellite stores.......their answer is well we can order it for free and have it tomorrow......well I can order it from anyone and have it tomorrow......I'm at your store today because I need it now.

While I don’t have the financials, I have helped in several deals like this. While the new PE has bigger AUM, the first one may have well stripped whatever they could have out of it with maturing debt. Granted, the new PE probably is refinancing/getting funding from the old PE as part of the deal and has contingent consideration. The only times that I have seen this be successful for PE #2 is when PE #1 is winding down the fund associated with the investment or if PE #1 mismanaged any turn around efforts and couldn’t increase EBITDA.

As I read all these financial acronyms I'm reminded of the word Chandlery (which were generally run by old salts who were helped by young folks starting their careers with boats, and today is basically a non-existent entity). Awhile back I lamented the closing of Bargain Bilge in Patchogue NY. Last week it was announced that it will probably become a Starbucks. I was impressed with WM when they first started. Then the products they carried started carrying the WM brand and most got weaker and more expensive. Next marine products disappeared from the front half of the stores to make way for clothing. WM stores are big. I can't help thinking that this latest change will result in stores disappearing and WM turning more and more to an online entity with products carried based on profit margins and advice coming from automated Chats.

I know we all ***** about WM, but just imagine life without them?
They are the only national marine store left, and other than Ft.Lauderdale, or I should say South FL, they are the only choice for many areas of the US.

I have noticed that the clothes thing has not only taken up the WM stores, but many tackles stores around here have a large space dedicated to clothes as well. I guess it helps with the bottom line, which all retail stores need these days with the internets!

I guess with the sale being PE to PE we will never really know the financials behind this?

Actually some of us don't have to imagine. We remember life without them. I think the demise of their retail stores in now inevitable, but hey there's always Amazon and Marine Max.

I'm more optimistic about this sale than others. Not to the point of being certain, but definitely feeling better about the new owners than the old. L Catterton just has a better record and the backing necessary to do more.

While West Marine appears somewhat to be in a segment by themselves, when looked at from a business standpoint, they're often looked at similarly to auto parts stores and even somewhat like hardware stores. Auto parts stores and hardware stores do also have relatively low sales per square foot. Certainly nothing like successful clothing stores. However, they don't have the overhead either. Nor the same risks of closeouts and obsolescence. Auto parts stores average about $200 sales per square foot. Traditional hardware stores even less than that. Clothing stores meanwhile are above $300 with most mall stores $400 or more. However, rental or mortgage costs for auto parts and hardware and likely West Marine are more in the $10-12 per square foot range while clothing stores are $18-30 and good malls are more like $50. We own both hardware and clothing stores and although the hardware stores will never see the sales per square foot the clothing stores do, they're very profitable and sustainable. During the last few years you've seen a lot of clothing stores close and very few auto parts and hardware stores do so.

I firmly believe West Marine is salvageable and can be successful. I believe my team of people could do so, so I must believe the new owners can do so. I always felt the previous buyers were a bit out of their league and acting more out of desperation than long term vision. They saw the mistakes and the need to reverse the pattern and build on marine parts and supplies rather than other things. However, they lacked the resources ultimately to do so. They retracted when they should have been expanding. They were defensive when they needed to be aggressive and take the offense.

Now, we'll see what they can do. I'm sure ultimately they'd like to build it into something that might be sold profitably, but their parent company is not one into just buying and reselling. They have businesses they hold on to. It remains to be seen if L Catterton will hold on to some long term, but West Marine could be an excellent long term investment as the clear leader and only real force in their business segment. Over time we will find out their plans. I believe they should have growth plans to increase the business. And the fact Amazon and others sell some of what they do shouldn't deter them at all. Do you see Auto Zone and Alliance retreating because of Amazon? What about Ace Hardware with huge sales increases in 2020?

I have more hope for West today than I did a week ago. No guarantees, but under the previous owners there wasn't hope.

OB, you should have put together an entity to bid on this. Sounds right up your ally! One of the issues with PE firms is they stretch their operational areas of expertise too far, and strictly look at a entity from a financial flip perspective and /or back an individual with a vision but not enough operational heft (personnel, personal time commitment, etc) to make the vision work. Catterton and their parent at least understand and have more history and focus on retailing and consumer brands. It would great to have someone successful in this space (Broad marine parts and accesories, both wholesale and retail, maybe services) and not acquiesce to Amazon.

I'm trying to be retired. No national entities for me. I was all in just three counties but needing to manufacture and then the pandemic and now find us in four states but that's the absolute limit.

I hope the investors are looking at the long term. Unfortunately most are looking for the flip.

All good, and a smart good operator knows how much they want to/should bite off. That said good operators are few/far between and retail really is in need of them right now. Hopefully Catterton is successful.

My guess is these guys will operate with a longer term and more savy approach. A lot depends on how it's structured into a fund or otherwise