The Death of Sierra Snowboard and Its Repercussions

As many people have known I’ve followed what has been going on with Sierra Snowboards in regards to the snowboard industry, its business practices, and how this was all going to pan out. Initially it started with Burton Snowboards along with a few others pulling out from them, then it lead to rumors of imminent chapter 11 status as a way to cock block Burton from getting paid up front for their product, and now most recently some new developments have arisen in the form of Michael Horrosh the owner filing a motion to move the bankruptcy from chapter 11 bankruptcy (reorganization) to chapter 7 (liquidation). Here’s what was posted on Easy Loungin who did the ground work looking through the court documents:

Michael Anthony Management (Sierra) filed a motion to convert the matter from chapter 11 (reorganization) to chapter 7 (liquidation). But that motion has not yet been heard or ruled upon.

The unsecured creditor’s committee has objected to Sierra’s motion because the committee thinks Sierra’s assets can be sold for greater value under the reorganization procedures (the committee has asked the court to appoint a trustee to handle the sale).

According to court filings, there are currently two offers to purchase Sierra’s assets. One is from the entity that runs The House. Sierra wants to the court to approve that offer.

Sierra claims The House has conditioned the deal on: (1) getting the sierrasnowboard.com domain name; and (2) Michael Harrosh (who is basically Sierra’s owner) entering into a “consulting” agreement with The House. But Sierra claims it does not own the domain name — Michael is the alleged owner.

Michael says he will agree to sell the domain name and enter into a consulting agreement if: (1) he gets $750,000 of the sale proceeds; and (2) Sierra and all creditors release any and all claims they may have against Michael, his father, a business entity owned by Michael and his children, and a business entity owned by Michael’s father.

The domain name is one of the most valuable Sierra-related assets. Michael is using it as a bargaining chip to walk away with some money (the $750,000) and limit future liability for him, his family, and their business interests (that is what the releases are about). My guess is the creditors claim Sierra (not Michael) owns the domain name. A big battle over domain name ownership is somewhere on the horizon.

As stated in this quote the matter of going forward to chapter 7 has not been heard or ruled on so at this point in time the news on Transworld Business is not fact . One can only assume this is due to the long weekend and will be addressed in court later this week. Now that you’ve had a chance to catch up on what has been going on, lets delve deeper into the list of possible scenarios that could happen to the snowboard industry as a whole.

The most obvious one is that The-House buys them out. That would mean all of last years merchandise would be sold at a mark down of 30 to 40 percent along with all sales agreements being met. Essentially for The-House it would be business as usual for them with their current business model. They were one of the original purveyors of couple season old discount gear to entice beginners into buying snowboard equipment.

The biggest issue of this to take note of though is that the unsecured creditors committee has objected to this as they believe leaving Sierra in chapter 11 could benefit them more. Rightfully so getting fifty cents on the dollar is better than two cents. Being an unsecured creditor means that you’re basically fucked when it comes to getting back payment and that everyone else is in front of you. So think about the smaller companies that had business with Sierra that weren’t able to get their credit secured. What do you foresee happening to them? Yeah not ideal but we’ll go into that further down the road.

So lets say the judge in this court case hears what the unsecured creditors committee is saying and agrees to it. That would mean that Sierra keeps on going with business as usual till debts are repaid. The only issue now would be with companies as a whole. As who would want to deal with them anymore? So slow death approach but business as usual for the time being.

The third and probably most fucked option and one that I personally hope to never see is that it goes to chapter 7 liquidation that ends up in either a public auction or a private buying group. This would be one of the most detrimental fuck overs in the snowboard industry ever. As the product is being liquidated we could potentially be seeing companies like Sams Club (Wal-Mart), CostCo., or some mega conglomerate store sucking up the inventory. This would lead to some of the worst gray marketing we’ve ever seen. Once again the biggest hit would be taken by local stores that were seeing gear being blown out at 70% off and unable to compete with it. This would be a worst case scenario and I don’t foresee it happening, but the potential is there.

As I mentioned earlier there’s a group of brands that were doing business with Sierra that have unsecured credit. Basically without secured credit these guys stand to lose the most money on a chapter 7 filing if not all of what they had invested in the inventory Sierra now holds on to. This is where the biggest hit to the industry will happen, the large companies might take a small hit and have to be smart with a few things for a year or two to recover. But for a smaller brand it ultimately means that capital that was expected to be paid to make the next years gear, pay advertising, or salaries won’t be there. The effect of this bankruptcy could be felt as far down as the next three seasons as brands of a smaller caliber struggle to recover from such a substantial hit.

So is there a silver lining to the demise of Sierra? There are a few things that everyone needs to take note of that have been part of Sierras problems since they started. First and foremost every brick and mortar shop regardless if it’s in Tahoe or all the way in New Zealand has had to deal with their international shipping, super discounts, and general disregard for buying agreements. By leveling the playing field so that current in line product stays with the standard mark downs that are advertised (yes advertised not talking about the super secret VIP sales) we won’t be seeing discounts of 20 to 30 percent before or right at Christmas, instead the standard 10 percent till January, then slowly marking down as the months get closer to April where ultimately it’ll hit the 40% off until the fall when the last years gear gets even more of a mark down.

One other issue that will happen is the brainwashing that Sierra perpetuated. Most of their fan boys believe they shouldn’t pay MSRP and have come to believe that mark downs in excess of 25% before the season start are normal. By stopping this on a massive worldwide scale we’ll start to see a healthier industry both from the retail aspect to the manufacturing. MSRP has always existed so that companies covered their expenses (i.e. materials, marketing, product design, labor, team development) then the shops had their mark up on it for their costs (i.e. rent/mortgage, salaries, marketing, team development, grass roots/local scene development). Which honestly after 14 years of working in shops I can tell you the mark up doesn’t make a shop owner rich by any means and barely pays the bills.

Right now as we watch this shop reach the end of its life span we can only speculate on everything that is going to happen. But as the ball has been in motion and the 800 lb. gorilla in the room has finally been spotted hopefully more companies, industry people, and customers realize what is happen.

20 Comments

  1. steet says:

    The part that really sucks about this is that everyone gets screwed over, from shops to manufacturers, heck even the employees of Sierra lost their jobs (even if they did work for an evil corp, I hate to see people lose their jobs), but Mike comes out on top. Especially since the domain is registered in his name.

  2. yeah right says:

    well, I disagree with the liquidation being massive. Mike already liquidated when he went 70% off , and free shipping. The only product left in 2011 capita, union, and rome. Since he had to prepay those invoices, they are relatively small. It is sad to see the companies get screwed here, but they played with fire. I guarantee they weighed the risks. As far as the house buying them, I think that would not be good. They already have to much online market. Lets let them die slowly, and hopefully burton and billabong will go after horrash till the death. That guy is a crook, and deserves to get burned. His family has been screwing the industry, and competitors for years.

  3. e says:

    Goes back to selling out or cashing in article you had. There will always be somebody to take advantage of the situation regardless of the outcome to others. I would love to point a finger & name call, but this is a situation the market in general made. You play with fire, guess you’ll get burned eventually. However, he shouldn’t get a penny until he pays his creditors(brands).

  4. MOM&POP says:

    BYE BYE SERRIA, WELL DONE MIKE!!!!!

  5. MOM&POP says:

    BYE BYE SERRIA

  6. jo daddy says:

    Mike wanted to rule the internet Board market. But sierra didnt play by the same rules as the other retailers. He was warned over and over by k2, Ride, Burton you cant be 20% off new product in october. His father did the same shit with Levi jeans over 20 years ago.
    Karma is a bitch he will just pocket as much $$$$ as he can greedy little bloodsucker. nobody in the industry like him, he always was a spoiled little rich kid. And all he cared about was $$$$ not snowboarding per se.

  7. E I totally agree with you pay everyone else then get money, it’s not like he’s exactly hurting for cash himself. He’s just a rich twat. I’d personally like to pimp slap him for all the damage he’s done to local shops.

  8. Cubes says:

    Interesting , I haven’t read the article yet but just last week my friend bought a 2011 Rome Agent, looks like they are milking the International market especially Australia and New Zealand. personally I buy from Milosport, Buysnow and Tactics.

  9. steet says:

    Here’s a decent writeup explaining what is going on. Pretty unbiased and straight forward: http://easyloungin.com/forum/topic.php?id=4930&page=23#post-219450

  10. jb says:

    So it sounds like the Burton didn’t cut them off for discounting, just for not making payments.

    Not trying to stand up for Mike/Sierra here (it sounds like a pretty scummy operation based on Esq’s write-up) but it seems to me the whole mess around MSRPs/sales agreements/fighting gray marketing has nothing to do with protecting local stores and everything to do with protecting “brand image”.
    Read the gray marketing article closely; the Burton VP doesn’t make a big deal about MSRP, but does compare their brand with Louie Vuitton & Porsche/how they “can’t have product in Costco”.

  11. It definitely makes Burtons save local shops look like lip service at this point.

  12. Mike says:

    This is crazy about hearing all of this.. I was at the daily give-a-way and a person asked how come no more Burton boards so all that searching led me to this site..

    Now I feel a little different about Sierra now.

  13. pil says:

    wow… Why are you people making so much noise about the likes of burton loosing a bit of money. I can understand your point about people loosing there jobs and smaller shops not being able to compete, but burton and others fix the price of there stuff, and screw us all, time and time again. And second to this, I’m sure they will be able to wright off the debt against there tax bill, and will have more than enough of your money in the bank to take the hit in the short term. THE ONLY THING THAT iS WRONG HERE IS THE PRICE FIXING AND EXPORT RESTRiCTIONS THAT ARE EMPOSED ON TRADERS, BY THE BIG NAMES, THAT STOP FREE TRADING AND FUCK US ALL. Try buying a burton board in the uk we pay double the USA price and dont have the option of inporting, as they will stop supply to any shop found exporting. how can anyone defend there behaviour

  14. Chris says:

    I’m sorry Angry but I disagree. Buron’s MSRPs are ridiculously overpriced. Sierra demonstrated that by showing where the market for snowboards is. And yes, I’ve become used to purchasing all my equipment in March because of their sales. And outside of Capita (because they have reasonable MSRPs), I will never by a board unless it’s 30-60% off. But that’s because this sport is overpriced. And Burton’s attempts to price-fix will not keep me from thinking that.

    I will forever miss SS…. And will forever-never buy Burton.

  15. Plenty of other brands out there but FYI 10 years ago most board prices were similar. Prices have remain the same across the board. Oh and for what it’s worth I’ve always wondered what it’s like to be brain washed by Sierra?

  16. theTRUTH says:

    Chris, you are the reason why the Snowboard industry is where it is at. Guys like you who will drive 45 minutes to save $5 (whilst using up $8 is gas money). Go ahead and miss Sierra……next time you actually need a Binding Strap or a Ratchet….don’t go running into your loca Snowboard Shop please. Make sure you call your beloved Online Deep Discounter that only gives a sh*t about making a dime or two off your *ss. Nobody is telling you to buy Burton nor any other brand. Guys like you are the reason why the economy is in this state. Stop being such a cheap *ss already. Like Angry said……”Brainwashed” hits it right on the head

  17. [...] a solid break down of legal proceedings from Sierra Snowboards demise then talked about their repercussions. For the tech savvy we talked about taking it in the rear and how there are still an abundance of [...]

  18. Chris says:

    BOARDS ARE NOT THE SAME PRICE THEY WERE 10 YEARS AGO!!! I bought my first Lamar NEW for $250. That was a while ago, but it was around ’95. I bought a top of the line Salomon a few years later for in the $300’s.

    I understand inflation. It should take around 20 years for prices to double at normal inflation rates. The snowboard industry’s prices did NOT increase with inflation. In fact, they increased at well above. If they had normal price increases, we’d see mid-range boards in the $500 and high-end boards in the $600-700 around 2015-2018. We’re about a decade ahead of that. Which means the industry has fast outpaced what is considered ‘normal’ increases in retail prices.

    And what’s with the “brain-washed”… really? That’s all you’ve got? A meaningless retort is a sign of defeat. I get you guys are all on the side of the industry. So I understand you’re angry about…. something. But I really couldn’t care less. I just want to ride. And Sierra helped me do that more. Burton does not. It’s literally that simple.

  19. If you want to ride go ride no ones stopping you but you. You’re the one that believes you need new gear every year.

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