Bauer Performance Sports Ltd. has drawn a minor penalty from its successful rush to become the world’s No. 1 maker of hockey sticks.
The company is selling more sticks than ever, but sticks break with greater frequency than its helmets and skates do. That was never a problem for stick-makers when they made wooden sticks that sold for $30 or $40 each: Customers rarely asked for refunds, because manufacturers didn’t offer them.
But now, high-tech, high-priced composite sticks are the standard, and players shell out up to $300 for them. Manufacturers, in turn, offer 30-day warranties on the sticks.
“The warranty-return rate on sticks is more than any other product we make,” Kevin Davis, president and chief executive officer of Exeter, N.H.-based Bauer, said in an interview Thursday, adding that the percentage of sticks being returned is in the single digits.
As a result, margins on sticks that Bauer sells are lower than its other products. And the more sticks it sells, the greater the warranty costs it sustains by refunding the broken products.
“If you break a wood stick, you throw it away,” said Ron Potelle, manager of the Valiquette Source For Sports store in Ottawa. “With composites, customers will bring them back.” His store gets six to 10 sticks returned per month, compared with less than four pairs of skates per year, and even fewer helmets.
Bauer said the warranty costs contributed to a second-consecutive quarterly decline in its adjusted gross profit, to 30.1 per cent of sales in the third quarter ended Feb. 29, compared with 34.5 per cent in the same period a year earlier.
Mr. Davis said sales increases in sticks have outpaced expectations, and wouldn’t be “a significant contributing factor” to future profit-margin fluctuations.
Weaker margins have been the downside to Bauer’s stellar growth in the one area of the hockey business it didn’t dominate until recently. Bauer, founded 85 years ago in Kitchener, Ont., and taken public in 2011 by buyout firm Kohlberg & Co., has long been the leading seller of helmets and skates, but it was a distant No. 4 in sticks five years ago.
Its fortunes changed after Bauer introduced its second-generation composite stick in 2006. The company doesn’t break out sales figures by category, but has said stick sales doubled from 2006 to 2010, and increased between 17 per cent and 32 per cent in each of the last three quarters. Since last year, Bauer has claimed to be the leading purveyor of sticks and the most-used brand by National Hockey League players, although long-time stick leader Easton-Bell Sports Inc. also makes the same latter claim.
Composite sticks, first introduced by Easton-Bell in 1999, are preferred by players over wood due to their lighter weight, lower flex point and more powerful shot.
“It’s a huge plus in terms of performance,” said Mike Swartzback, co-owner of five Sports Experts franchises in eastern Ontario.
Bauer has benefitted from its aggressive push into composite sticks, driven by millions of dollars in research and development spending and a huge marketing push, including paying such NHL stars as Claude Giroux, Alex Ovechkin and Steven Stamkos to use its products.
Bauer has expanded into apparel, lacrosse and roller-skating in recent years to diversify out of the slow-growing $250-million (U.S.) per year hockey equipment market, where it already has a 50-per-cent market share.
But the company has also been stealing share from competitors in its core market, reporting revenues from hockey-related products increased by 24 per cent in the first nine months of its current fiscal year.
“In a low single-digit growth market, where we are No. 1 in every category, to grow like that is remarkable,” Mr. Davis said.
Bauer reported a net loss of $7.5-million in the seasonally weak third quarter, up from a loss of $10.9-million in the same period last year. Revenues were up by 6.5 per cent, to $51.5-million.
When sticks break
Composite sticks have become the standard for National Hockey League players due to their lighter weight and harder shot, but like the wood sticks they replaced, they still break regularly.
“A stick’s a stick,” said Canucks rookie winger Zack Kassian in the locker room after practice on Thursday in Vancouver, preparing for the team’s Friday home game against the Los Angeles Kings after losing their first Round 1 match of the playoffs on Wednesday. On composite sticks, he said, “They’re reliable. Obviously some break. It’s hockey: sticks are going to break.”
They can, however, break at inopportune times. Last June, in Game 3 of the Stanley Cup finals, the start of the second period saw Canucks defenceman Alex Edler’s Easton brand stick snap as he passed the puck after a faceoff, leaving Mr. Edler unarmed for the ensuing Boston rush. The score was 0-0 and the Bruins capitalized seconds later, en route to an 8-1 victory.
More recently, in late March against the Colorado Avalanche, Mr. Edler snapped two sticks taking slap shots – both during the same two-minute power play.
David Ebner and Sean Silcoff