When Outdoor Voices, the activewear brand that made a name for itself in the first wave of the direct-to-consumer revolution, entered the market last June, its teaser presentation, seen by BoF, included growth figures impressive. Forecast sales for 2022 are $90 million, up from $40 million pre-pandemic, with a compound annual growth rate of 30% since 2017.
Add to that a repeat purchase rate of more than 75% and a projected gross margin of around 45% this year – which is expected to be 50% next year – and the pitch deck indicates that the company, which has suffered several changes in direction in recent years, is well placed. He even calls it “1st Order Profitable” music, to the ears of potential buyers.
But peel off a layer and there’s a more nuanced story to tell. According to a source close to Outdoor Voices finance, the company was not profitable on an EBITDA (earnings before interest, tax, depreciation and amortization) basis in 2021.
Ashley Merrill, president and principal investor of Outdoor Voices, said via text that the company was “essentially EBITDA neutral” in 2021. When a company says it’s profitable on the first order, it doesn’t does not necessarily consider variable costs, such as paid marketing, an increasingly expensive way to acquire customers. Merrill said OV’s “month-to-month profitability varies throughout the year depending on whether or not we are pushing marketing for growth at that particular time.”
The company is also considering investments instead of an outright sale, according to multiple sources, and is looking to raise $25-50 million, hoping to invest some of that capital in opening more stores and to further develop the business. But raising cash now may not be easy: Investors are hesitant to back mainstream brands with a looming recession, especially ones that aren’t always profitable.
Whatever the outcome, Outdoor Voices is a unique case study. It’s been more than two years since founder Tyler Haney left the company, replaced by Merrill – CEO of sleepwear brand DTC Lunya – who took a majority stake in the company through his investment fund, NaHCO3 , at a valuation of $40 million, more than 60 percent below its peak valuation of $110 million.
In early 2021, Merrill recruited Urban Outfitters veteran Gabrielle Conforti to be OV’s new CEO, in a bid to improve operations. (The website currently has a Net Promoter Score, which measures customer satisfaction, of 80, according to the sales medium.)
On the design side, Conforti has also pushed Outdoor Voices in a broader direction. While Haney’s skills as an executive and manager were constantly challenged while she was always in charge, her ability to brand, market and design a product with precision was held in high regard. Today, the Outdoor Voices aesthetic is less distinctive – even compared to mass competitors like Alo Yoga and industry leader Lululemon – although perhaps more appealing to a wider audience.
After returning to OV in a consulting role a few months after her initial departure, Haney returned in January 2021 and now runs the CBD and web3 businesses. Recently, however, she expressed interest in re-entering the activewear space with a new brand.
“I’ve certainly thought about it and I have a lot of stuff ready to go when the time is right. I’m fully focused on [web3 platform Try Your Best] TYB right now,” she said on Instagram Stories. “TYB would be helpful here, given that we’re creating tools that allow brands and fans to connect directly, build together, and then share success, growth, and more.”