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Overcoming an Unkind Cut
Swiss Army Brands Inc.
(NASDAQ: SABI)
1 Research Drive Shelton 06484
203-929-6391
Chief executive officer:
Peter W. Gilson
Revenues (FYE December 31, 2001): $114.6 million
Gross profit (FYE December 31, 2001): $46.3 million
No. employees: 240
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Business New Haven
4/29/2002
By: BNH
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In 1891, a master cutler named Karl Eisener built the Swiss military a pocketknife called the Soldier's Knife. He used his mother's name, Victoria, and the cross & shield insignia of the Swiss military as his trademarks. During World War II, American soldiers gave the knife the sobriquet “Swiss Army knife.” And that is how the iconic knife is still known.
From a corporate point of view, the downside to a legend is that the product lasts. Shares in the stock for Shelton-based Swiss Army Brands Inc. (NASDAQ: SABI), the exclusive distributor of the Victorinox Original Swiss Army Knife in the U.S., Canada and the Caribbean, reached a high of 17.75 in 1993 before beginning its decline to a price of 4.06 in summer of 2000.
Rather than rest on its precision-engineered laurels, the company has diversified, launching new products as far back as the mid-1990s. Today, the purveyor of the Swiss Army knife - which now comes in 100 combinations with various translucent handles - also imports, manufactures and distributes cell-phone cases, men's apparel and travel accessories. One of its watches has adorned the wrist of actor Noah Wylie on the television show ER.
Clearly, “equipping people for life's adventures,” the company's slogan, has become a complex affair.
Last October the company opened a retail shop in Manhattan's SoHo district. That summer the company's stock had risen to a 52-week high of 8.01. Then came September 11, a precipitous travel decline and continuing restrictions on items such as knives at airports - and Swiss Army Brands' products suffered.
Although the company's 2001 revenues were buoyed by a net investment gain of close to $1.5 million from the sale of its common stock in John Hancock Financial Services Inc., sales by the company - two thirds of whose outstanding shares are owned by insiders - dropped last year by 13.17 percent to $114.68 million. In April, its stock, which had fallen to 5.46 in December, rose as high as 7.15. That month, its market capitalization reached $58.34 million.
According to CEO Peter W.Gilson, Swiss Army's mature knife business, which had been growing modestly each year prior to September 11, was affected dramatically by the terrorist events. Gilson, who says he received his first Swiss Army knife when he joined the Boy Scouts 50 years ago, points out that the company's Ad Specialty business for knives is off more than 65 percent.
Retail, which was weak sector-wide throughout 2001, is still generally slow, Gilson says. Broadly, sales of Swiss Army's highly touted travel gear were virtually non-existent in September, October and most of November. However, Gilson says sales at its retail store have rebounded this year “resoundingly.”
Gilson expects the company, whose demographic is the 44-year-old active male with an outdoor orientation, to grow through a combination of diversification and revitalization. He notes that the company's watches were dramatically re-engineered and re-designed last year.
And while he identifies companies such as Schrade and Buck as competitors for Swiss Army's pocket knife as well as Chinese imports, Leatherman, Gerber and SOM as competitors on its multitool side, he says he is aware of no competitor for a steel case, Swiss movement watch in that product line's core $150-$350 price range.
All company products that carry the “Swiss Army” insignia, such as the watches and knives, are manufactured in Switzerland, Gilson says. Its other products, which it sells under the Victorinox logo, are manufactured elsewhere.
In spite of the widespread movement of women into outdoor activities, Gilson says that the company's consumer studies suggest that a significant percentage of the products that women buy, which account for 40 percent of purchases, are for men. Gilson says he believes that number is changing within sales of the company's travel line, and he says it will change even more when the company introduces a line of women's apparel.
And, he acknowledges, sales of the Swiss Army knife still spike around Father's Day.
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