West Marine Declares Chapter 11 Bankruptcy
We have received a number of emails and comments with questions from readers about West Marine’s recent decision to go through a Chapter 11 reorganization. CEO Paulee Day assures vendors and customers they are not going out of business and says, “Chapter 11 is a legal process that will allow us to restructure by reducing our debt and putting us on a more sustainable financial footing.…”
For Bay Area and West Coast sailors who know this local company, founded in 1968 in a garage in the heart of Silicon Valley (Palo Alto) by sailor Randy Repass, it’s a disappointing fall from its early days when it was a central player in the booming California sailing market. Randy was selling rope out of his garage until he opened his first retail store in the busy sailing area of Palo Alto in 1975, under the name West Coast Ropes. That was two years before an ad (with $125 CQRs) for the store appeared in the first issue of Latitude 38.
The West Marine company history page shares: “I decided from the beginning that I wanted to take care of people,” says Mr. Repass. “The high-tech industry I had been working in didn’t provide me with an effective way to do that. But the boating industry gave me the opportunity to really enjoy my work and interact with customers who shared my interests. I was having a blast and building a business at the same time.”
Times have changed. There are many factors contributing to West Marine’s current headwinds. They face the same challenges that all “big box” retailers face from Amazon and other online retailers. West Marine started when sailboat builders in Santa Cruz, Costa Mesa and across the US were building the vessels as fast as they could. Sailboat building barely exists in the US today. West Marine’s administrative offices, the staff on the shop floor and most of the patrons were predominantly passionate sailors who were deeply involved in the sailing community. Thousands of people in the marine industry got their start at a West Marine store.
The company went public in 1993 until it was taken private again in 2017 by private equity company Monomoy Capital Partners. In 2021 it was bought by L Catterton, headquartered in Greenwich, CT, which calls itself “The World’s Leading Consumer Growth Investor.” In 2022 they moved the headquarters from Watsonville, CA, to Florida. Interestingly, L Catterton is backed by Louis Vuitton, which, as all sailors know, is a major investor (sponsor) in the sailboat race called the America’s Cup. L Catterton, LVMH and Groupe Arnault (the holding company of LVMH CEO, Bernard Arnault) says they are the largest diversified, consumer-dedicated private equity firm in the world.
L Catterton’s purchase appears to have followed the normal private-equity playbook of loading the company up with debt just as we were all emerging from COVID and the fresh-air-powered boating market was having a bit of a boom. Nothing lasts forever. Since the COVID boom faded and consumers have been buffeted by inflation, tariffs, wars and oil-price shocks, retail sales have slowed. That makes it hard to cover those private-equity-induced debts.
One might think that LVMH’s premier role in the America’s Cup would give L Catterton a chance to utilize the high visibility of the America’s Cup to promote sailing, along with the world’s largest marine retailer and retail marine hardware sales, and connect with the passionate sailing community that supported West Marine from its inception in 1968. That does not appear to be the LVMH vision. The America’s Cup is now an entertainment “property” that has also lost touch with sailing, making it difficult to connect with the average West Marine customer.
Most sailors we talk with feel that, somewhere along the way, West Marine lost their local, personal connection. They used to sponsor local events and offer life jackets to youth sailing programs. The Pacific Cup used to be called the West Marine Pacific Cup. The changing world has definitely made it harder for companies like West Marine to offer the kind of support they used to, but private equity has increased the distance and diminished the connection between the owners and the customers.
The LVMH CEO currently owns the 333-ft Feadship Symphony, pictured above, and he is rumored to be the billionaire behind the construction of a 470-ft Feadship at an estimated cost of $650 million. It’s supposed to be a secretive project, and though we shouldn’t believe AI, “Claude” believes it’s true. That would be quite a bit more than that another sailor and marine retailer, Jeff Bezos, spent on his 417-ft, $500 million sailing yacht, Koru, which is now rumored to be for sale. As far as we know, Amazon has never sponsored a sailing event and is a primary reason West Marine and many companies can no longer sponsor either. You can’t shop at Amazon and expect local marine retailers to support your youth program.
Back on the California waterfront, there continue to be local chandlers, riggers and boatyards to serve local boaters. We give shout-outs to those who support local sailors and Latitude 38. The retailers include Whale Point Marine Supply, Fishery Supply and Sailing Supply/Downwind Marine, and you can find gear, paint, polishes, rope and hardware in many boatyards, engine shops, rigging shops and other marine stores that line the coast. You can find great boatyards and other local suppliers in the current issue.
We know many sailors are lured in by the price and convenience of Amazon, but we also know the ultimate price we’ll all pay when we’re left with a single source for our marine goods. Most yacht brokers today are in a similar bind as the private-equity-owned YachtWorld has become the default multiple-listing service for boats for sale. Ultimately, like Amazon, they grew big because they provide an excellent service, but unsurprisingly, the price of that service has become extreme.
It’s frequently hard to correlate cause and effect, but over the past decades, we’ve watched an incredible boom in the internet, private equity, wealth, efficiency and apps to provide connection, communication and convenience, all with an apparent concurrent reduction in people’s free time to relax and sail. Simple things like roller furling have made sailing so much easier. There’s lots of improved technology, but seemingly less time to hoist the sails. Sailing and West Marine were booming when people were sailing Sunfish and Hobie Cats. The challenges faced by West Marine may be the same as those faced by sailing itself. We may soon be able to have marine products delivered by drone to our slip or 3D-print them at home, but how will we ever have time to use them? Spreadsheets, data sets and metrics all show us how to earn a penny or save a penny but don’t how us how to have free time.
West Marine CEO Sandra Day says the Chapter 11 should help them get stronger and, hopefully, get back to a level of service that will support the boating market. They hope to emerge from bankruptcy in August. All of us sailors think we know what they should do to improve business prospects, though these are challenging times for most brick-and-mortar retailers and it is surely daunting. It will be good for sailing if Randy Repass’s Palo Alto-founded retailer finds its way back to providing the expertise, support, convenience and products that keep sailing fun and accessible.
It’s Memorial Day weekend! Buy some boat polish at any local marine retailer, give the boat a quick buffing, then get the boat out and go sailing!