RYU Apparel Inc. (TSXV: RYU) (OTCQB: RYPPF) (FWB: RYAA) (“RYU” or the “Company“), creator of award-winning urban athletic apparel, is pleased to share a letter from COO Rob Blair.
DEAR FELLOW SHAREHOLDERS & INVESTMENT COMMUNITY
During the past eight months, I’ve had the privilege of meeting valued RYU shareholders, customers, brand partners, and members of the broader investment community. If we’ve met, I hope to have conveyed the principles that guide my leadership style: honesty, transparency, and a collective commitment to not only doing the job right, but to doing it better than anyone else in the world.
That is the bar we set, and the approach we take, here at RYU.
2022 has come roaring in and I’m pleased to share that we’re off to our best start in 3-years. Our eCommerce revenues, transaction rate and average order value is anticipated at double- and triple-digit growth and we are now seeing comparative markers to Pre-Pandemic years. Starting out the year on the right foot has been an upshot 12-months in the making.
With that said, looking back at 2021, we are admittedly disappointed with the overall results. Although we made great strides in building a foundation for long-term growth, and partnered with some fantastic brands, athletes and causes, the significant global supply chain challenges and restrictions related to the pandemic impeded our operations. Heading into 2022, that disappointment, combined with the successes we pulled off despite the many hurdles, is the fuel that drives us unwaveringly toward our objectives. We have retooled the entire organization to include industry veterans, exceptional creative minds and external agency partners that have collectively brought the focus of RYU back to eCommerce, crafting world-class products and generating demand for those products.
We developed and implemented a four-pillar growth strategy, which I outlined in my first letter to shareholders in June of this year. That strategy began to take root in the second half of the year, contributing to encouraging third quarter revenues, which were up 300% compared to the same period last year.
Following our positive third quarter results, we remain optimistic and well-positioned for further growth, especially considering the revenue contribution for our soon-to-be-launched consumer products, as well as revenue related to inventory shortages and delayed deliveries, won’t be accounted for until approximately Q3 of this year
That said, if this two-year period has taught us anything, it is not to adopt a “grow at any cost” mentality, but rather to deliver long-term shareholder value through the best-in-category product we hold ourselves to and a focus on steady and sustainably profitable growth. So as the pandemic continues into its third year, and global supply chain issues, restrictions and shutdowns remain a reality, we will continue to holistically review our business and adjust operational priorities accordingly. Without question, this starts with adjustments to inventory control, retail and partnerships.
Anticipating the aggregation of these headwinds, we’ve adjusted inventory purchase quantity and staggered delivery cadence, as well as further vetted marketing partnership opportunities to manage risk and exposure. We have multi-year relationships across our tight knit supply chain, and a primarily vertical distribution model that allows us to maintain premium products and price-points while shortening go-to-market timelines. During the second half of 2021, we will accelerate revenue growth through FW22 key item reorders and new color drops. We have also added a Central American knit manufacturer to our supply chain to deliver high-margin (duty free), high-energy, quick-strike tee and fleece programs.
As we consider all aspects of our omni-channel strategy, we remain digital-first with a continued focus on accelerating the adoption of our newly launched printed catalog business. Through the delivery of high-quality, content-rich catalogs and digital content, we aim to reduce customer acquisition costs while increasing brand recognition and long-term customer value through repeat purchasing.
As part of this strategy, and with the continued shift of consumer shopping to digital landscapes we made the tough decision to close our Williamsburg and Toronto store locations on February 26th and March 27th accordingly and are now concentrating on co-located to “shop-in-shops’ and store partnerships – predominantly in the USA. Reducing our retail footprint, while expanding our omni-channel accessibility will better insulate us from economic downturns and market fluctuations which have historically forced brands to cut costs and re-evaluate priorities. The Vancouver flagship location, which also serves as Company headquarters, will remain open driving experiential retail, community, and new product activations.
This endeavor has achieved a momentous start with the appointment of industry heavyweights DJM Sales Consulting to lead global sales and oversee the company’s wholesale strategy as well Caraway & Co Sales Agency as our US national sales agency of record.
Respectively, these groups have achieved tremendous results for their brand partners. During their tenure at SAXX Underwear, DJM created a global wholesale division that generated $35M+ in revenue increases and Caraway & Co has a proven track record of productive sales increases for some of the world’s top brands including UGG, Prana, Mountain Hardware and Havaianas.
Forward momentum with key nation-wide retailers has already been established.
In conjunction with these moves, RYU will now anchor its design, development and marketing efforts towards its male customer base. Accounting for approximately 70% of our eCommerce business, a re-focusing of capital investments towards this customer will maximize the performance of capital and further position us for category dominance. Alongside our men’s business we will continue to produce smaller capsule collections with a varying seasonal delivery cadence for our loyal female customers.
Leading the digital marketing charge for RYU will be newly hired Zachary Beers. Formerly from Arc’teryx, where he helped grow direct-to-consumer revenue from $1million to $500 million, Mr. Beers will oversee online and marketing efforts across eCommerce, social media, paid media, email and printed catalogs as well as strategic marketing partnership activations.
Through our re-invigorated product lines and new, CULTURE OF MOVEMENT brand position under the mantra MOVEMENT MATTERS, we are seeking to open up our audience to a wide range of guests and introduce them to product solutions and unique brand experiences. By targeting movement as a holistic part of life, we can approach a number of market areas where there is little RYU brand awareness and build top-of-the-funnel acquisition. Movement enthusiasts exist well outside the walls of a gym or traditional competitive sports, and we will be there to engage with them while they’re on the move. We have a loyal and dedicated brand following and we want to bring our new Movement Matters philosophy to strategic audiences that have yet to meet RYU.
To empower our rebranding efforts, we’re doubling down on content creation internally. Using digital as our leading edge to drive new awareness, content is king. We have on boarded a number of creative talents to support new and engaging storytelling opportunities and couldn’t be more excited to launch Movement Matters to the world. Investors can expect to see polished creative that will drive an emotional connection with our brand and be authentically relevant to both our core and new audiences in May of this year.
With an emphasis on digital for RYU, there’s a lot of potential in staking our claim in the metaverse. Web3 and its basket of technologies is here and should not be ignored. We also recognize the pent-up demand for physical community experiences based on the past 2 years of pandemic restrictions. RYU is uniquely positioned to leverage our movement-based storytelling to merge online and offline experiences leveraging metaverse concepts. We hope to be pioneers that set the precedents on how direct-to-consumer brands use blockchain, NFTs, Augmented Reality, and other emerging technologies and not simply follow others.
As Web3 and the metaverse become more refined, the possibilities will only be limited by our imagination. Our competitive advantage as an agile company allows us to lean into this space earlier than larger brands and define success around building the Store of the Future and becoming a Brand of the Future.
Movement does not exist solely along physical terms and with our focus on digital development and emerging technologies, there is untapped potential in the esports space. While esports may not have been a traditional target for our brand, the needs of both the competitive and recreational gaming communities are clearly addressed by our product offering and the growth of this sector is undeniable. By using our Movement Matters storytelling and seeking to create a holistic digital-physical experience using emerging technologies and concepts, there’s a great opportunity to drive digital first guests into our physical experiences and vice versa. RYU plans to not be contained by boundaries in either the physical or digital worlds and has the right product with the right story at the right time to cater to our guests no matter where they are between online-offline environments.
The company has spent the past 14-months entrenched in a chapter of re-building to an extent of which the company has never seen. We are a discovery brand, and it goes without saying that we will continue to make clear-cut data driven decisions that align with the retail market at large, as well as the key drivers of our own business.
We are well positioned in 2022. As I shared above, our focus is on slow, steady and sustainably profitable growth with a continued commitment to intelligent innovation in the space. The losses incurred in 2021 remain significantly lower than in prior years, thanks to our continued adjustments – a trend we expect to continue.
The true potential of the RYU brand lies in the exceptional group of people who are driving it forward. We have built a common vision for the future and relish the opportunity to overcome the challenges we will undoubtedly face as we achieve our objectives.
I conclude by expressing my deepest gratitude to our customers who have stood by us through the pandemic, and to our shareholders and board members for their continued support and council.
