Biggest thing killing dive shops?

[Cert1967]

The SCUBA industry in the USA? On the decline. There will be fewer shops, fewer manufacturers, lower employment, and greater consolidation.

Too many shops, too many manufacturers, too many boats, and not enough consumer spending.

And just like department stores, hardware stores, and grocery stores - dive shops are being rolled up and closed up. Just like your local shopping mall and main street.

The bigger issue is the size of the US dive market - smaller than Europe. The action is in Asia, perhaps the only growth market for the industry. I suspect that is where the marketing dollars are flowing.

Lots of thoughts and opinions above, but a shortage of facts. And industry numbers are hard to come by.

Scubapro as a proxy for the industry? The diving segment results for the past 4 years. It would be interesting to see SP's breakout by country/region.

SP Sales (m)

2017, 77
2016, 69
2015, 72
2014, 80​

SP Profits (m)

2017, 1.8
2016, <9.4>
2015, 0.9
2014, 3.6​

SP lost about 3m on sales of almost 300m in the past 4 years. Over 6m in the last three years. Down deep you want the best?

Perhaps JOUT is shopping SP? Would SP insiders be interested in a private buyout?

Worse, SP wrote off the majority of their Seabear acquisition. Innovations in the indsutry? Here's one that went south. There must be an interesting story behind this - major industry player, unable to innovate in-house, gets taken by a small startup?

Excerpts from JOUT 10-k reports.

• During the year ended September 30, 2016, the Company acquired the outstanding common stock of SeaBear GmbH (2016,10-k)
• Operating expenses for the Diving business increased by $8,916 year over year due primarily to a goodwill impairment charge of $6,197 recognized in the current year. Additionally, the acquisition of Seabear contributed approximately $1,200 of incremental expense in the current year. (2016,10-k)
• Operating profit for the Diving business declined $10,318 from fiscal 2015 due to the goodwill impairment charge, sales declines and incremental R&D costs from the Seabear acquisition. (2017-10-k)
  
• The purchase of short-term investments in 2017 used cash of $46,607 while the purchases of the Seabear and Northport businesses in fiscal 2016 used cash of $9,152. Additionally, the acquisition of Seabear contributed approximately $1,200 of incremental expense in 2016. Goodwill, of $2,219, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not deductible for tax purposes. (2017-10-k)
  
• During the quarter ended July 1, 2016, the Company re-evaluated its projections for its Diving reporting unit as a result of deteriorating business conditions. As a result, the Company performed an impairment test on the goodwill of the Diving reporting unit, including the goodwill acquired in the SeaBear acquisition, and determined an impairment charge was required. (2017-10-k)

If SP is a valid industry proxy, would you make an investment in a retail dive shop?

And an example of a dive shop for sale. Asking $150k for a biz with sales of $250K. The owner is ~70 and wants to sell - no kidding. Brutal - more likely a candidate for liquidation than a sale. It is hard to imagine a situation where this business has any market value.

Dive Center for Sale - Dive Center in Central Virginia for Sale
Dive Connections/Scuba Diving/Charlottesville, Virginia/PADI Dive Shop​

 

[Dogbowl]

Generally speaking, MBAs are not taught how to run small businesses, which dive shops are. Most MBSs focus on skills relevant to large corporations. Small shops and large corporations need to be run differently.

 

[Mrs. B]

People obsessed with rules attracting other people who love rules and like being the big kahuna

I feel all the medical waivers and liability issues has ruined a lot of things about the activity and once you own a boat it’s tough to go back

Too many divers are not interested in fitness and don’t understand risk which makes it difficult for fit people to be bossed around about safety

It’s about so much more than retail

 

[Dogbowl]

The SCUBA industry in the USA? On the decline. There will be fewer shops, fewer manufacturers, lower employment, and greater consolidation.

Too many shops, too many manufacturers, too many boats, and not enough consumer spending.

And just like department stores, hardware stores, and grocery stores - dive shops are being rolled up and closed up. Just like your local shopping mall and main street.

The bigger issue is the size of the US dive market - smaller than Europe. The action is in Asia, perhaps the only growth market for the industry. I suspect that is where the marketing dollars are flowing.

Lots of thoughts and opinions above, but a shortage of facts. And industry numbers are hard to come by.

Scubapro as a proxy for the industry? The diving segment results for the past 4 years. It would be interesting to see SP's breakout by country/region.

SP Sales (m)

2017, 77
2016, 69
2015, 72
2014, 80​

SP Profits (m)

2017, 1.8
2016, <9.4>
2015, 0.9
2014, 3.6​

SP lost about 3m on sales of almost 300m in the past 4 years. Over 6m in the last three years. Down deep you want the best?

Perhaps JOUT is shopping SP? Would SP insiders be interested in a private buyout?

Worse, SP wrote off the majority of their Seabear acquisition. Innovations in the indsutry? Here's one that went south. There must be an interesting story behind this - major industry player, unable to innovate in-house, gets taken by a small startup?

Excerpts from JOUT 10-k reports.

• During the year ended September 30, 2016, the Company acquired the outstanding common stock of SeaBear GmbH (2016,10-k)
• Operating expenses for the Diving business increased by $8,916 year over year due primarily to a goodwill impairment charge of $6,197 recognized in the current year. Additionally, the acquisition of Seabear contributed approximately $1,200 of incremental expense in the current year. (2016,10-k)
• Operating profit for the Diving business declined $10,318 from fiscal 2015 due to the goodwill impairment charge, sales declines and incremental R&D costs from the Seabear acquisition. (2017-10-k)
  
• The purchase of short-term investments in 2017 used cash of $46,607 while the purchases of the Seabear and Northport businesses in fiscal 2016 used cash of $9,152. Additionally, the acquisition of Seabear contributed approximately $1,200 of incremental expense in 2016. Goodwill, of $2,219, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not deductible for tax purposes. (2017-10-k)
  
• During the quarter ended July 1, 2016, the Company re-evaluated its projections for its Diving reporting unit as a result of deteriorating business conditions. As a result, the Company performed an impairment test on the goodwill of the Diving reporting unit, including the goodwill acquired in the SeaBear acquisition, and determined an impairment charge was required. (2017-10-k)

If SP is a valid industry proxy, would you make an investment in a retail dive shop?

And an example of a dive shop for sale. Asking $150k for a biz with sales of $250K. The owner is ~70 and wants to sell - no kidding. Brutal - more likely a candidate for liquidation than a sale. It is hard to imagine a situation where this business has any market value.

Dive Center for Sale - Dive Center in Central Virginia for Sale
Dive Connections/Scuba Diving/Charlottesville, Virginia/PADI Dive Shop​

Wow! Those numbers are not good. Really gives me an idea of how small the market is for dive gear.

 

[Rred]

Forbes claims that 8 out of 10 businesses fail, and INC. says 96% fail within ten years.

So when the OP asks about dive shops failing...ARE they really failing at any higher rate than any other business?

 

[tbone1004]

So are we seeing a shift from mom’n pop operations to ‘big box . Tstores?’

Richard.

not really. When you think of a mom 'n pop shop, you think of a specialty outfit that is unique in that area. I.e. if I go to a mom 'n pop shoe store, they are offering me something unique that a large retailer can't and I'm willing to pay a premium for that. On the shoe side, it is because I have very wide feet and very few "big name" manufacturers make shoes that fit, so I will go to a specialty shop to buy running shoes to get the service from people that actually know feet and the shoes they sell, as well as have the selection in stock.

LeisurePro doesn't really have that, unfortunately DRiS is a bit diluted from what they used to be but still have that, and places like Cave Adventurers are very much like that.

Problem with most local dive shops is that you have one store that is "PADI and Aqualung", one that is "NAUI and Scubapro", one that is "SSI and Mares", and they are all pitched against each other trying to say that PADI is better than NAUI, and Aqualung sucks you should buy Mares etc. Never talking about pros and cons of each, just my stuff is better than his.
This is made worse that when you go into most LDS's they don't actually maintain good inventory so when you want to buy something, they have to order it. Well, if they have to order it, most of the time it will have a longer lead time, higher price, and have you paying sales tax, so you may as well just order it from one of the online shops, pay less money, and get it faster. It's a win-win for you, and the LDS really doesn't have anything to offer you other than acting as a middle man.

Some of the really nice shops like Gypsy have a pool on site where you can actually go in the back, hop in and try out the gear before you buy. That's worth something, but they also maintain a decent inventory of what they sell and unless you are in a weird size for some wetsuits, there isn't usually any wait. They sell several brands, though typically favor Scubapro, but they will talk to you about the pros and cons of each. They teach for a couple agencies though I believe they favor SSI, but it's never down-talking the other agencies, it's always up-selling why you should train with them. They've been at it since 1982 and still growing...

 

[Umuntu]

Operating expenses for the Diving business increased by $8,916 year over year due primarily to a goodwill impairment charge of $6,197 recognized in the current year. Additionally, the acquisition of Seabear contributed approximately $1,200 of incremental expense in the current year. (2016,10-k)

My reading of that summary says that 2016 had a number of exceptional "bookkeeping " write downs of goodwill and consolidation expense from the Seabear acquisition. It's common to writeoff acquisition goodwill and costs as this can then be deducted from taxable income.

So 2016 is an exceptional year. Cash Flow statements are likely to be more interesting.

 

[Dogbowl]

My reading of that summary says that 2016 had a number of exceptional "bookkeeping " write downs of goodwill and consolidation expense from the Seabear acquisition. It's common to writeoff acquisition goodwill and costs as this can then be deducted from taxable income.

So 2016 is an exceptional year. Cash Flow statements are likely to be more interesting.

Sure, but 2014, 2015 and 2017 profits aren't that impressive. I'd expect one of the biggest scuba manufacturers to be making more money for its shareholders than that. Unless, of course, there's some creative accounting involved which deflates profit.

 

[drrich2]

Too many divers are not interested in fitness and don’t understand risk which makes it difficult for fit people to be bossed around about safety

So, if these burdensome unfit people were somehow excluded from diving, what do you think would change? What new privileges would the ‘fit’ receive?

I think they’d still be filling out the same disclaimers/waivers and diving under pretty much the same restrictions they do now.

 

[Mrs. B]

So, if these burdensome unfit people were somehow excluded from diving, what do you think would change? What new privileges would the ‘fit’ receive?

I think they’d still be filling out the same disclaimers/waivers and diving under pretty much the same restrictions they do now.

I'm not for excluding anyone but I resent all the bossy people telling us how to dive when they are a train wrecks. And then they all booze it up late at night on vacation and show up at the boat half dead but have a heart attack if my husband and I want to split a Corona with our fish taco off site. I think dive shops have a culture and too many have gone the direction of pushing gear and rules (classes) without the foundation of good self discipline and setting a good example.
I am just saying that the scuba industry has an image problem as I see it and I have been very involved for many years (VI, Hawaii, California)
My husband and I both love diving and I am trying to explain what turned us off (from most dive businesses) even though we have a lot of great "diving friends" --the establishments generally evolve to something many do not want to seek out or pay for.
IF someone said "why did you eventually get out of horse shows?" I could provide that answer as well..