Burton Lays Off 42; Exclusive Interview With President

Burton Snowboards let go 42 people (almost nine percent of its work force) yesterday in what’s being called a restructuring of the entire company, with the intent of reducing expenses. SNOWboarding Business got an exclusive interview with Burton President Laurent Potdevin, who discussed the restructuring of the company, the current state of the world market, and how Burton is going to work more closely with specialty shops to help grow the market:

What’s going on at Burton?

Since I came on board last November, we’ve gone through an extensive exercise of looking at how we allocate our spending, how that spending contributes to the profitability of the organization, and how it contributes to making better products. As a result of the exercise, we’ve gone through a fairly significant reallocation of our spending, which resulted in cuts. Also as a result of this exercise, we’ve cut a number of people today. We’ve also done a number of other things from a cost-trimming standpoint.

So since you took over, you’ve been looking at the operations of the company?

Yes, I’ve also spend a fair amount of time in a lot of our markets– whether it’s been Europe, Japan, or in some of our key markets in North America–looking at how we’re running the organization and looking at how efficient we are.

As a result of that, you’ve made these decisions?

In looking at everything, all areas of the company were affected, both from a regional and departmental standpoint. In looking at how we do things, we found a lot of projects we didn’t necessarily need or that didn’t contribute to the key initiatives we’re pursuing. Or we’ve just gotten smarter about some of the things that we do. This has allowed us to reduce a lot of the costs and reduce the expenses.

Can you give me some examples?

If you look at the overall costs that we trimmed, one third of those costs came from staffing, and two thirds came from reduction in expenses. With our reduction in expenses, we looked at every single expense–from the way we negotiated our contracts to how we print our catalogs, to how we negotiate with our banks to how we move our product from factories to dealers. Every single area has been looked at carefully and either renegotiated or eliminated if we didn’t need it.

Was there a specific timeframe that you were working on? Or was this a coincidence that this happened right now as orders are coming in?

Yes and no. It’s no coincidence because we timed it in a way that we felt was appropriate for the organization, but it’s not timed as a result of preseason orders being disappointing at all. It’s more just one season ending and another kicking off.

You’re very well aware that we’ve got a large portion of our preseason orders in the system right now, but we’re still in the process of gathering orders, so this is really not tied to a disappointment with our preseason sales.

What fiscal year does Burton operate on?

January 31 is the end of our fiscal year.

So do you try to tie it into the snow business cycle?

The timing of this cost reduction was timed with the cycle of the business. It’s a time for us that makes sense. That’s how we’ve looked at it.

So this is when you re-negotiate with factories and things like that?

Yes, there’s definitely a lot of that happening right now.

Does this affect all of Burton Corporation, including Gravis and Anon, or just Burton Snowboards?

It?s affecting all of Burton Corp. and a few of the cuts were at Gravis, too. When David Schriber (Gravis President) and Mike Abbott, our CFO, went through the exercise, we really looked at all areas of the company.

If the economy was robust and growth was very strong, we still would have gone through the same exercise.

This is the second year in a row that Burton has experienced big cuts. Is there an overall reason for that?
>There are two very different reasons for these cuts. If you look at last year, it was a combination of very poor snow globally that had not been seen in 22 years, a bad economy, and the affect of terrorism, which resulted in us being blindsided with our preseason orders. We had anticipated a lot more growth than what we got and we had to react quickly to that situation.

This year the environment is challenging, but our line has been very well received. When it comes to product, we never sit back. We constantly push.

This was something we really needed to do through the entire organization and it was an exercise that we would have done no matter what, so the reasons are very different from last year to this year.

How does what’s going on in the world markets play into this? Can you tell me what the state of Japan is right now?

In Japan, we’re actually happy with what’s going on there. The gray market is still a large issue that we’re dealing with and it’s something we’re fighting. We’ll continue to fight it very aggressively. It’s something that?s hurting the snowboard market over there in general, and it’s hurting us as a brand.

Our line has been very well received in Japan and we’re happy with what’s going on in the market.

I’ve heard the market isn’t growing like it used to be?

We’re actually hearing that participation numbers are growing. There’s definitely a consolidation at retail and I think that’s a global phenomenon. We’re seeing chains growing, and we’re seeing specialty stores having more difficulty in the market. There’s more consolidation at that level.

We’re putting a lot of programs in place both from a product and a marketing standpoint to make sure we support specialty stores as much as we can.

What’s going on in Europe? I heard they had a slow start to the season.

The weather didn’they’ret cooperate early on, but the sell-through is pretty good right now. I was just talking to our staff in Europe and they’re having a very strong end of season at retail. The snow is good everywhere and they’ve had a lot of snow.

Europeans usually take a week-long vacation in February to go to the mountains and the resorts have been booked solid. So business at retail has been good, which is going to leave them with clean inventory levels. That’s a very positive sign for us as far as the ’04 season goes.

Is it like the U.S. where these sales right now are marked down significantly?

It depends whether you’re in the city or at a resort. In the cities products are marked down, but at resorts products won’t be marked down until the beginning of March. That’s somewhat similar to what we have in the U.S.

From the standpoint of how we forecast our business, and how we intend to go through ’04, we’re very conservative with how we buy our inventory. We’re only ordering based on preseason sales and this is a model that works very well for us. We’re really not building any more inventory than what we need for preseason. We’re going to be scarce with our products. That’s really what we want this season.

Let’s go back to something that you started to touch on. You said Burton’s initiating some new programs for the specialty shops. What are the programs and how are they going to help grow the market?

With the way the retail landscape has evolved, we’ve taken steps to make sure that we’re protecting the specialty stores while being able to offer our product to a wider audience. In doing so, we’ve developed product such as the UnInc board line, some new boots and bindings, and some of the outerwear, that will only be available to specialty stores. We’re calling these Coalition Shops. There will be POP around that program, as well as specific advertising. On our web site, we’re going to have a dealer locator designed just around Coalition product as well.

So not only are we going help those core specialty shops as much as we can with product and marketing support, but also both with our catalog and web site will be driving as much traffic as we can to those specialty shops.

With the cuts you’ve made, was some of that planning scaled back?

Not at all. The cuts that we’ve made, as tough as they’ve been, are not jeopardizing any of those programs in any way. The cuts are to areas that we felt were not contributing to the major initiatives that we’re currently pursuing.

Where does Burton go from here? What’s the future?

The future is that we’re going to keep pushing really hard on product innovation. We’ve got incredible developments coming down the pipeline right now. We’ve not reduced any of our funding to product development and how we’re going to be marketing that. Both our team and our product right now are very clearly dominating the sport and we’re going to pool all of our resources to make sure we differentiate ourselves even more.

Is there still an overall idea that Burton can grow significantly in the snowboard market?

Yes. Significantly would have to be quantified. But growth is definitely available. Participation in the sport is growing. There are newcomers to the sport and we have great programs in place to attract those people–whether it’s our LTR program or helmet programs. Women’s participation is definitely something we’d like to see increase. It’s still a very heavily male-dominated sport. We’ve got an incredible offering of women’s specific product.

At the high end of the spectrum, we still put out incredible product. Whether you’re a beginner who’s trying to learn and we make you learn faster or whether you’re an expert at spinning, we’re going to make you spin faster and higher. A lot of that growth is to be had right now through market share gains, and we feel like we’re very well positioned to do that.

How many people were let go today?

There were 42 worldwide, but most were from North America. People have been treated honestly, fairly, and as generously as possible. People got a very fair severance package and their benefits were extended for the duration of the severance package. We’ve offered a number of services–whether it’s helping people writing resumes or offering outplacement services. Our HR group has done a very good job in helping these people as much as we can.

How many people are still working at Burton?

It’s slightly over 400. and marketing support, but also both with our catalog and web site will be driving as much traffic as we can to those specialty shops.

With the cuts you’ve made, was some of that planning scaled back?

Not at all. The cuts that we’ve made, as tough as they’ve been, are not jeopardizing any of those programs in any way. The cuts are to areas that we felt were not contributing to the major initiatives that we’re currently pursuing.

Where does Burton go from here? What’s the future?

The future is that we’re going to keep pushing really hard on product innovation. We’ve got incredible developments coming down the pipeline right now. We’ve not reduced any of our funding to product development and how we’re going to be marketing that. Both our team and our product right now are very clearly dominating the sport and we’re going to pool all of our resources to make sure we differentiate ourselves even more.

Is there still an overall idea that Burton can grow significantly in the snowboard market?

Yes. Significantly would have to be quantified. But growth is definitely available. Participation in the sport is growing. There are newcomers to the sport and we have great programs in place to attract those people–whether it’s our LTR program or helmet programs. Women’s participation is definitely something we’d like to see increase. It’s still a very heavily male-dominated sport. We’ve got an incredible offering of women’s specific product.

At the high end of the spectrum, we still put out incredible product. Whether you’re a beginner who’s trying to learn and we make you learn faster or whether you’re an expert at spinning, we’re going to make you spin faster and higher. A lot of that growth is to be had right now through market share gains, and we feel like we’re very well positioned to do that.

How many people were let go today?

There were 42 worldwide, but most were from North America. People have been treated honestly, fairly, and as generously as possible. People got a very fair severance package and their benefits were extended for the duration of the severance package. We’ve offered a number of services–whether it’s helping people writing resumes or offering outplacement services. Our HR group has done a very good job in helping these people as much as we can.

How many people are still working at Burton?

It’s slightly over 400.