Solo Brands CEO Seeks to Separate Rising Sales From Slumping Stock

By most measures, the four core businesses of newly listed Solo Brands are growing sales in a sluggish economy and enjoying solid customer retention and return rates.

Compare that to the 75% drop that Solo’s shares have suffered this year after going public in October 2021, and CEO John Merris is contending with two distinctly different realities.

“I think psychologically one of the challenges I underappreciated going into this is the psyche of the team,” Merris told PYMNTS. “A lot of them have shares themselves, and they’re watching how [the stock] is doing and correlating in their minds the company performance with the stock price.”

He said he is confident that performance of the stock and the business will reconnect.

In the meantime, Merris keeps busy growing and innovating Solo’s four brands, while looking for new ways to leverage its list of 4 million customers that the Dallas-based direct-to-consumer retailer — which trades under the ticker symbol DTC — has amassed.

While Solo has built its stable of brands under the same outdoor lifestyle umbrella, Merris stressed the fact that the company is a long-term growth play and not an aggregator looking to flip companies.

“What’s different for us at Solo Brands is that Solo Stove, Chubbies, Oru and Isle independently are standalone businesses,” he said. “They’re beloved brands. They have passionate, loyal customer followings, and there’s no intention to kind of bring them into a singular brand.”

“They will continue to operate separately as businesses, but again, find some operational efficiencies through fulfillment and some of our eCommerce execution at the central platform,” he added, noting the company’s plans to continue to accelerate the brands it has while also performing as businesses out in the marketplace in 2023.

“We love DTC because DTC gives us a one-to-one relationship with the consumer. We’re directly connected with about 85% of our customer base, [and] about 85% of our business is online, direct to consumer,” he said, noting the remaining 15% of the business that is wholesale is becoming increasingly important with its products sold in Costco, BJ’s Wholesale Club, Dick’s Sporting Goods, Ace Hardware and more.

“The reason that we’re omnichannel, the reason that we have a ‘D-T-C’ ticker, but you still see us in these wholesale accounts, is because the DTC isn’t about the channel, it’s about the customer,” he said. “The customer is telling us what they want. They’re telling us the products they wish that we’d innovate around. They’re telling us also where they want to shop.”

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Let Them Pay as They Wish

Whether they’re active kayakers or passive patio sitters, customers are also telling Solo how they want to pay for purchases, and Merris said Solo is listening.

“We used to be like, as long as we have two or three [payment methods], they can pick one and be on their merry way,” he said. “Now our philosophy has shifted to let them pay how they want to pay. Some people want to pay with Apple Pay, some want to pay with Amazon Pay, some want to put on their credit card or their debit card, and some want to do buy now, pay later. There’s a variety of methods. What you want is to give customers the opportunity to shop and pay how they wish.”

Keeping CACs Low

Amid continued economic headwinds, Merris said Solo plans to remain tightly focused on market positioning while leveraging its “competitive moat” to get the most out of the 4 million active customers in its database.

“Anybody that’s running a DTC business knows that customer acquisition cost is the name of the game,” he said. “If you can’t keep them down, you’re going to struggle. If you can keep them down, there are ways that you’re going to be able to thrive and reinvest into your business and innovation.”

To that point, the two prime customer acquisition metrics he’s fixated on are retention and the ability to attract new customers, ideally organically.

“Email [makes it] essentially free to interact with your customers versus spending money on an ad,” he said. “When I talk about competitive moat, I’m very focused on our ability to drive strong retention mechanisms and metrics inside of our business. Today, about 50% of our revenue is generated from customers shopping with us for a second, third or fourth time.”

As a result, the company’s third-quarter earnings results reported in November saw sales up 47%, direct-to-consumer revenue up 48% and its wholesale business rising 40%, all while maintaining a comfortable gross margin of over 63%.

For the near term, it’s going to be all about continued innovation at Solo Brands, as reflected in its expanded product line, including a new pizza oven, mini tabletop firepit and patio heater joining Solo Stove, while its apparel brand Chubbies slips into a new line of pants, and its Isle paddleboard unit launches Switch, “a standup paddleboard that converts into a sit-down kayak,” he said.

There’s also work being done to grow recurring revenue via subscriptions of such consumable items as wood pellets or pizza dough, he said.

“We like to say that we have brands that are really good at putting smiles on people’s faces,” Merris told PYMNTS. “We tend to do that outdoors. We like the outdoor space.”

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