RYU Apparel Inc. Provides Growth Strategy Update from COO Rob Blair

Rhea-AI Summary

RYU Apparel Inc. (TSXV: RYU, OTCQB: RYPPF) shares its mid-year update, emphasizing a pivot towards long-term growth and enhanced product demand. In 2020, RYU significantly cut costs, resulting in lower losses. The company plans to focus on four strategic pillars: lean organization, brand storytelling, innovative product creation, and enhanced digital presence, with revenue growth targets set for $50M by 2025 and operating ratios improving to <35%. The firm is poised for a resurgence, with plans for a new retail model and an enhanced eCommerce strategy, aiming for sustained shareholder value.

Positive

• Achieved significant cost reductions leading to lower losses in 2020.
• Targeting a gross margin of over 70% and a five-year CAGR exceeding 80%.
• Plans to implement a lean organization aiming for an operating ratio of less than 50%.
• New retail model set to launch in 2023 with high sales productivity targets.
• Digital strategy showing early success with a 77% increase in weekly online sales.

Negative

• None.

VANCOUVER, BC, June 15, 2021 /PRNewswire/ - RYU Apparel Inc. (TSXV: RYU) (OTCQB: RYPPF) (FWB: RYAA) ("RYU" or the "Company"), creator of award-winning apparel that facilitates human movement, is pleased to share a mid-year update for RYU.  

DEAR FELLOW SHAREHOLDERS & INVESTMENT COMMUNITY,

As we approach the halfway mark of 2021 RYU has achieved a great deal in building the foundation for long-term growth.

2020 was a humbling year to say the least, the economic down-turn forced brands to cut costs, re-evaluate priorities and accelerate digital channels. RYU significantly reduced retail costs and made one significant investment in an attempt to grow brand awareness, but softened its focus on product and demand creation in a time of rapidly changing consumer behaviors. The losses incurred in 2020 were significantly lower than in prior years, thanks to lower head office costs and lease terminations. With 2020 in the rear-view mirror, our impetus now shifts towards targeted investment in product and demand creation.  

We are in the midst of building an organization of industry veterans, exceptional creative minds and external agency partners that will bring the focus back to crafting world-class products and creating demand for these products. Since February this year, the team has developed four strategic pillars to set RYU on a sustained growth trajectory. These plans will begin to take root in the second half of this year. Over the next three years, RYU will not only differentiate itself in this large, saturated performance apparel industry, but will become an iconic brand leader that resonates across generations. We will deliver shareholder value by maintaining a lean, yet highly effective organization and investing capital raised directly into demand and product creation. We have set gross margin targets of >70% and a five-year CAGR of >80%.

1)  LEAN ORGANIZATION: Our goal is to achieve an operating ratio of <50% over the next 36 months, without losing site of the need to build an organization that will drive brand desire. Led by exceptional creative we will craft powerful brand stories that will become the inception of our demand creation process. A newly appointed Brand Executive Creative Director will assume brand creative lead and will work in concert with creative powerhouse Mother LA (pending final engagement agreement) to build an authentic voice and consumer acquisition strategy.

As interim Product Creative Director, I will oversee the aesthetic transformation of RYU into a highly curated assortment of re-invented classic sports silhouettes, that will remain timeless and spark joy in hearts of our core audience. We have re-imagined our product creation engine, streamlined the supply chain, implemented a new Product Line Management (PLM) system and "category killer" line product line architecture that will drive style productivity and profitability.  A new Go-to-Market process will allow RYU to increase speed and frequency of product newness to consumers.

Our eCommerce division is undergoing an in-depth audit and restructure of key performance indicators on traffic, conversion rates, search engine optimization (SEO) and search engine marketing (SEM).  

A new retail model will take flight in 2023 with a small footprint experiential model of retail that allows for a seamless omni-channel "click and collect" model. This model is being built as a hybrid of large format experiential retail and small dispensary type formats. The model will allow for geographic customization in design from the consumer data collected from eCommerce. This model will also increase productivity, targeting $1,500-$2,500 sales per sq ft with lower comparative overhead.

2)  BRAND: "Movement Matters" is our governing mantra, leading to the establishment of brand positioning, target audience and creative voice for all visual assets. Corporate governance for how we talk, how we behave and how we look. This not only filters through consumer facing assets, but also how we recruit, who we recruit and how we act internally. As well as developing and implementing overarching brand guidelines, we have established a creative briefing and internal/external review and production process. This will allow our team to maintain creative integrity, production quality and brand consistency across all marketing and branding campaigns and asset production.

3)  PRODUCT: We have re-imagined the product creation strategy centered on our consumer. This highly productive line architecture will be made up of curated and considered core styles. The product strategy will move RYU from a traditional, seasonal and transactional business model to a design led organization hyper-focused on creating desire in product that sells in volume. We still maintain the need for newness with specific emotional color and art injections, while creating long-lasting and ethical products that perform in multiple activities. This "category killer" business will build into our CULTURE OF MOVEMENT. The newly implemented go-to-market strategy will increase speed to market from 18 months to 9-12 months.  The increased frequency of new product introductions will support an enhanced consumer experience in store and online channels.  This also allows us to grow our profitability, through a streamlined vendor base and economies of scale on fabric, trims, and labor.

Foundational product architecture building blocks include Outerwear, Mid-layers, First layer Performance Tops, Shorts, Pants/Tights, Sports Bras, Headwear and Bags.

We have also partnered with key technology providers such as Noble Biomaterials, 37.5 performance enhancing materials, Polartec, Nylstar and Schoeller textiles driven by our consumer and our own strict environmental standards.

We will also develop a highly transparent supply chain and corporate social responsibility strategy based on our desire to not only deliver shareholder return but also ensure that our environmental impact is minimized as much as possible.    

4)  DIGITAL: Create an online experience that provides consumers with a seamless and consistent brand message across all touchpoints within the RYU ecosystem. We have brought on board seasoned eCommerce industry leadership with a proven track record of sustainable double digital growth with Athletic, Outdoor and Lifestyle brands. The new team will provide advanced analytics, monitor acquisition channels, sales funnels and consumer behavior to meet and exceed brand and sales metrics. Decisive action has already been taken to grow into the areas of paid advertising, SEO and SEM, as well as integrated campaign and eCommerce leadership. These actions have already driven gains of +77% increases in weekly online sales.

Supporting our digital strategy, we will also be implementing an in-depth quarterly catalogue program to help drive brand awareness and sales. We will bring the RYU brand into the homes of our target audience with meaningful stories, thought provoking ideas and relevant information. Industry data has shown that high-quality, content-rich catalogues are a major contributor to growing consumer base and increasing eCommerce conversion rates.

Entering 2022, all four of these pillars will be in full flight, with the product development being the final cornerstone in the foundation for sustainable growth.

During the second half of 2021 we will accelerate revenue growth through FW21 key item reorders and new color drops. We have also added a Central America knit manufacturer to our supply chain to deliver high margin (duty free), high-energy quick strike tee and fleece programs. Additionally, we will soft launch our new brand position and identify through the "Give a Little Respect" campaign starting in July to drive traffic and increase conversion rates.    

Our financial plans are being finalized through a 5-phase approach culminating in 2025 with a $50M net revenue target. As we grow the top line and create more efficiencies within our operating expenses, we intend to achieve an operating ratio <35% and $15M+ in EBITDA.

The future is bright, and we are putting the pieces in place for a once in a decade brand emergence. As we expand our eCommerce model, reinvigorate our retail, and unlock our women's category the RYU brand is poised to be the next great global brand story to come out of Vancouver.

The true potential of the RYU brand is the exceptional group of people driving it forward. We have built a common vision for the future and relish the opportunity to overcome the challenges that we will undoubtably face as we achieve our growth objectives.

I conclude by expressing my deep gratitude to our customers who have stood by us through the pandemic, our shareholders, and the board for the continued support and council.  

Sincerely,
Rob Blair
COO

About RYU Apparel

RYU Apparel (TSXV: RYU, OTCQB: RYPPF), or Respect Your Universe, is an award winning urban athletic apparel and accessories brand engineered for active lifestyles. Designed without compromise for fit, comfort, and durability, RYU exists to facilitate optimal human performance. For more information, please visit the RYU website at: http://ryu.com 

Forward Looking Statements Disclaimer

Neither the TSX Venture Exchange Inc. nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange Inc.) accepts responsibility for the adequacy or accuracy of this press release.

This news release contains forward-looking information that involves various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance of Mother LA, revenue projections, margin or EBITA targets. In addition, there is not guarantee of the future performance of Ecommerce or Brick and Mortar retail  revenue, new collections, production launches, sustainability targets, strategy implementation or current or future collaborations. Such statements as regarding the development and implementation of product placement in the series, celebrity product seeding, viewership or the increase of RYU's visibility to investor, viewers or customers. There are numerous risks and uncertainties that could cause actual results and RYU's plans and objectives to differ materially from those expressed in the forward-looking information, including those arising from the COVID-19 pandemic or otherwise, and which may result in the inability to develop and/or implement a comprehensive investor relations strategy and/or enhancement of RYU awareness with the investment community, including any capital market strategy, the investor relations providers failing to deploy their best-in-class platforms or to otherwise communicate any compelling value proposition of RYU, the failure of the campaign to highlight renewal of the RYU brand and subsequent successes under the its CEO, the possibility that RYU does not achieve positive cash flow operations. Except as required by law, RYU does not intend to update these forward-looking statements.

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SOURCE RYU Apparel Inc.

FAQ

What is RYU Apparel's growth strategy update for 2021?

RYU Apparel's 2021 growth strategy focuses on cost reduction, product demand creation, and a lean organizational structure aimed at long-term growth.

What financial targets has RYU Apparel set for 2025?

RYU Apparel has set a net revenue target of $50 million by 2025 and aims to achieve an operating ratio of less than 35%.

How has RYU Apparel's online sales performance changed recently?

RYU Apparel's digital strategy has resulted in a 77% increase in weekly online sales.

When will RYU Apparel's new retail model launch?

RYU Apparel plans to launch a new retail model in 2023, focusing on a small footprint and omni-channel experience.