Big Dog Holdings, Inc. Business Information, Profile, and History

Company Perspectives:

Big Dog's product philosophy is basic: Make a high-quality product, sell it at a reasonable price, and design it to be fun and functional. From stronger seams and softer fabrics, to superior embellishments and exceptional craftsmanship, Big Dog's line of men's, women's, and children's activewear and accessories is created to exceed sportswear industry standards. Our company commitment to quality, value, and fun is apparent on each and every product.

We at Big Dog Sportswear are committed to: Building a company that is profitable and respectable with a brand that is recognized throughout the world for high quality, good value, and fun and functional products; Providing outstanding customer service in all aspects of our business to ensure loyal and long-lasting customers; Creating the best team of skilled and ethical management and personnel who work together in an environment of opportunity, personal growth, and job satisfaction.

History of Big Dog Holdings, Inc.

Big Dog Holdings, Inc. is one of the fastest growing retailers in the United States. The company manufactures and sells sportswear accessories and licenses its name and logo to other products such as backpacks and hot sauces. All Big Dog products feature one of three distinct trademarks: "Big Dogs," "Big Dog Sportswear," or "Logo Dog." The Big Dog logo--an oversized, panting Saint Bernard, projects the image of "leader of the pack." The company is known for its catchy slogans, such as "If you can't run with the big dogs, stay on the porch." Most of the company's sales stem from its oversized, brightly colored sportswear, which presents an image of "quality, fun, and a sense of humor." Big Dog clothing appeals to people of all ages and demographics, but its sportswear is particularly appealing to baby boomers and their children, pet lovers, and people who love the outdoors.

Big Dog markets its products through retail, wholesale, Internet, and mail-order channels, but the bulk of its sales are from its retail stores. Big Dog owns 200 stores across the United States and one in Puerto Rico, and the company's retail sales account for more than 90 percent of total revenues. The company also has a line of children's apparel stores called Little Big Dogs and markets a line of Big Big Dogs sportswear, designed for big and tall customers. Its wholesale division sells Big Dog sportswear to specialty stores and upper-scale department stores such as Dillard's and Nordstrom. The company has a Big Dog Club with more than 30,000 members and operates the Big Dog Foundation, which donates funds to charities. Big Dog had sales of more than $115 million in 2000.

"Big Puppies" in 1983

The concept for Big Dog Holdings, Inc. was conceived on a rafting expedition in 1983. Before venturing out onto the water, a group of river-rafters was given a pair of oversized, brightly colored shorts. The gang loved the shorts, and one enthusiastic river-rafter replied, "Man, these puppies are BIG!" The phrase "big dogs" caught on and became the inspiration for Big Dog sportswear, which became known among river-rafters and beach-goers as "big puppies." The company first operated under the name Sierra West Manufacturing and was a wholesale sportswear dealer that sold its products to retail stores. It had only "limited sales" until it was acquired by its present management in 1992. The company considered 1992 the year that Big Dog Holdings, Inc. was founded.

Expansion in the 1990s

Big Dog's new owners included fashion-industry veteran Andrew D. Feshbach. Feshbach served as the chief executive officer, president, and director of Big Dog. He also served as the chief financial officer of the company from 1992 until 1997.

Feshbach assembled an aggressive management team that focused on rolling out Big Dog stores nationwide. The new management team also expanded the company's product line to include shorts, casual shirts, fleece tops and bottoms, loungewear, boxer shorts, swimwear, and sleepwear.

The company grew quickly. When Big Dog was acquired in 1992, it had only five stores. By 1997, it had 134 stores from Hawaii to Maine. Sales likewise improved. Sales in 1992 were about $11.4 million. By 1997, they had risen to $68.7 million. In 1997, Big Dog launched an initial public offering to pay off debt and raise money for further expansion.

Under Feshbach's guidance, the company was split into several divisions. Its retail division was the fastest growing and most successful. Big Dog had an advantage over many other sportswear retailers in that its clothes were not seasonal and dependent on the fashions and colors of a particular season. Most Big Dog fashions could be marketed year-round.

The company set ambitious goals to open new Big Dog stores each month. The stores were decorated with amusing local themes. Big Dog advertising showed celebrities such as actor Arnold Schwarzenegger and NFL player Reggie White wearing Big Dog sportswear.

The company opened Little Big Dogs stores at some locations as well. Little Big Dogs stores sold infants and children's sportswear and were adjacent to Big Dog stores. The company also sold a popular line of clothing called Big Big Dogs to fit large and tall customers.

The company's mail-order division distributed high-quality color catalogs designed with jaunty graphics. The company mailed out millions of catalogs each year. Big Dog also introduced its Magalog, a catalog that combined fun photos and stories from its Spots Illustrated newsletter.

Big Dog's wholesale division was its original division. The company sold its products to specialty shops and department stores such as Dillard's, Casual Male, Nordstrom, Belk Stores, Phoenix Big and Tall, the Brass Buckle, F.A.O. Schwarz, and Parisiah.

In addition to its traditional wholesale division, the company marketed its products through a corporate, wholesale division. Its corporate division sold Big Dog products to companies to give to their employees as gifts and incentives. Big Dog also made special-order shirts for companies with their logo on them. Big Dog also sold other products in its corporate division, such as coffee mugs, pens, and mouse pads.

In addition, the company marketed its products through its Internet division, BIGDOGS.com. Customers could order Big Dog products through the web site and also learn about the company. The company used the slogan "Surf with the Big Dogs" to market its online store.

Feshbach and his associates also formed the Big Dog Club, which had more than 30,000 members in 2001. The club was for people "who enjoy pets, leisure, sports and, of course, Big Dogs." Members received a special ID card, a newsletter, and enjoyed special discounts on Big Dog products.

Big Dog formed the Big Dog Foundation to raise money for charities such as the SPCA, Special Olympics, and DAWG (Dog Adoption and Welfare). The company held an annual parade to raise money for the Big Dog Foundation.

Brand Licensing and Leveraging in 1999

In 1999 the company began licensing its name and imaging to products other than clothing. Big Dog formed partnerships with other companies to use its name and logos on plush backpacks, hot sauces, and toys. Under the terms of its licensing agreements, Big Dog marketed the products along with the other company in the agreement. The products were sold in Big Dog stores. Some of the companies with which Big Dog entered into licensing agreements were Nabisco, Kellogg's, Hill's, Science Diet, MGM/VA, Coca-Cola, Andersen Consulting, Dollywood, Busch Gardens, Yamaha Motor Corporation, Toyota, and AT&T. Big Dog believed that licensing agreements were an economical, safe way to expand its business. According to Feshbach, they allowed the company to "leverage its brand further without adding significantly to its expenses."

In 1999, Big Dog entered into a licensing agreement with Golden West Specialty Foods, a $2.7 million manufacturer and distributor of spices and condiments sold to gourmet food shops. Golden West introduced Big Dog food "waker-upper" sauces such as Doggone Hot Sauce and Hot Dog Pupper Sauce.

Big Dog also formed other licensing partnerships. Under its agreement with Mango Teddy Bear Company, headquartered in Anchorage, Alaska, Big Dog logos appeared on Mango's backpacks, shoulder purses, key chains, and "Baby's First Big Dog" velour toys.

Big Dog entered into another agreement in which it co-branded a credit card with MBNA and formed a partnership with Fox-Interactive to help promote Fox's new CD-ROM, Aliens vs. Predator. Under the terms of this agreement, the first 10,000 customers to purchase the CD would receive a free pair of Big Dog boxer shorts. Both Fox and Big Dog promoted the offer.

Big Dog hoped to form licensing partnerships with companies outside of the United States. To help it reach this goal, in 2000 the company signed an agreement with BHPC Marketing, Inc. The following year Big Dog signed its first substantial international license to use its trademark in South Korea.

Licensing agent Jacki Blum said that Big Dog hoped to discover additional licensing opportunities in the pet industry. "The pet area is hugely significant for the future of the company. Dog food seems like a possibility, at least more so than puppy Prozac, but you never know what's going to happen when you're inside the Big Dog house," Blum explained.

PETsMART in 2000

In 2000, Big Dog and PETsMART joined forces. With more than 530 stores in North America and Canada, PETsMART was the number one U.S. specialty retailer of pet supplies. PETsMART was also a leading Internet pet supply retailer. As part of the agreement, PETsMART.com marketed Big Dog's merchandise through its online and offline advertising. In turn, Big Dog promoted PETsMART in its retail stores, catalogs, and throughout its web site. "PETsMART.com clearly has the brand, assets, management team and customer franchise to win in the highly competitive Internet pet space. Aligning with PETsMART.com not only provides our customers with the Internet's best retail solution for service, selection, and care, but also establishes Big Dog as a meaningful hand in the pet world," explained Feschbach.

A "Crazy" Deal in 2001

In the beginning of September 2001 Big Dog signed a deal to purchase Honolulu, Hawaii-based Crazy Shirts, Inc. Crazy Shirts was a private, casual sportswear manufacturer. Big Dog agreed to pay $10 million for the company, which had filed for Chapter 11 bankruptcy. Crazy Shirts sold its high-end T-shirts, knit tops, and accessories in its stores and through its web site, crazyshirts.com. It had sales of almost $50 million. Industry analysts thought the move was a good one.

By the end of September, however, Big Dog had backed out of the deal. The company expressed concern over the drop in retail sales following the September 11 terrorist attacks on the United States. Big Dog unveiled a line of stars-and-stripes shirts that boosted its own sales, but it was concerned that Crazy Shirts' sales were significantly hurt by a weakening economy and the sharp decline in Hawaiian tourism after September 11. "We simply did not see the value at the levels the bidding eventually reached for a company that was already in bankruptcy and under tremendous pressure as a result of the events of September 11," said Feshbach in the Knight Ridder/Times Tribune Business News. Feshbach added that Big Dog might still be interested in the acquisition later on, but at a reduced price. The Crazy Shirts purchase would have been Big Dog's first acquisition. The company obtained a $30 million line of credit from Wells Fargo to fund future acquisitions and expansions.

A Big Big Future

At the beginning of the 21st century, Big Dog's future looked bright. In the third quarter of 2001, the company posted a net income of $1.9 million on revenue of $30.2 million. In the future the company planned to expand its Little Big Dogs and Big Big Dogs sportswear lines, which accounted for 42 percent of its total retail sales in 2000, up from 39 percent in 1999. The company was conducting an ongoing search to land a "doggie prime-time animated series," according to Blum. With its new partnership with BHPC Marketing, it hoped to further license its products overseas.

Principal Subsidiaries: Big Dog USA, Inc.

Principal Competitors: The Gap, Inc.; The Disney Stores; Eddie Bauer, Inc.

Chronology

• Key Dates:
• 1983: A group of river-rafters comes up with the idea for Big Dog sportswear.
• 1992: New management acquires the company, which had been operating as Sierra West Manufacturing.
• 1997: The company goes public.
• 1999: Big Dog enters into a licensing agreement with Golden West Specialty Foods.
• 2000: The company signs an agreement with BHPC Marketing to license products worldwide; Big Dog forms a partnership with PETsMART.
• 2001: Big Dog agrees to acquire Crazy Shirts, Inc., but later withdraws offer.