The Slow Burn at Solo Stove

I had full intentions to write this week about baggage fees at Southwest and Frontier Air. 

However, this LinkedIn post from Eoin Comerford threw me off the scent and down a new rabbit hole:

I was taken aback by what I had just read: Solo Stove is going into a reorg? Solo Stove is called Solo “Brands”??

The Genesis of Solo Stove

I love my Solo Stove. I know it’s not really “smokeless”. I know you need to track down the right type of wood - almond, cherry, not pine - to avoid a back yard smoke bomb.

And let’s be honest, unless you purchase the expensive accessories, such as the $175 deflector, I know that you won’t get, you know, warm, while the fire burns.

I don’t care. Sitting outside, at night, fire roaring, friends and family laughing, wine glass in hand, it’s as good as it gets.

The company was founded in 2011 by two brothers passionate about the outdoors. Solo Stove then became a household name rather quickly, especially among outdoor enthusiasts. Its minimalist, simple design and ease of use set it apart. Throw in a pandemic, and here came the rapid growth.

The company had great marketing, a loyal fan base, and growth wind in its sales.

Diversification: What do kayaks and swim trunks have in common with fire pits?

In 2021, Solo Stove rebranded as Solo Brands, and embarked on an acquisition spree. The company’s leadership went on the hunt for acquisitions that fit with the Solo Stove brand. Then, seemingly having run out of good ideas, they acquired:

• Chubbies, a men's outdoor apparel brand;

• Oru Kayak, known for its origami-style folding kayaks; and

• ISLE, a paddleboard company.

While each brand holds merit individually, the synergies among them are not immediately apparent - because the synergies are not there. Does the core identity of Solo Stove - centered around fire pits - seamlessly integrate with apparel or water sports equipment?

An investment in Boise Cascade might have been a better move, and certainly more aligned with the company’s mission.

In October of that year, Solo Brands followed Traeger and Webber - the other brands that involve heat and fire - and went public, achieving a valuation exceeding $2 billion. The IPO was met with enthusiasm, reflecting investor confidence in the DTC model and the outdoor recreation market's growth.​

Fast forward to today: Weber’s stock price dropped in half in less than 18 months, performing so poorly it went private. Traeger’s stock has fallen 92%, it’s “on sale”.

Solo Brands - well, hasn’t had the same performance.

The lastest quarterly numbers have painted a more challenging picture. In the fourth quarter of 2024, net sales decreased by 13.2% to $143.5 million, primarily due to declines within the Solo Stove segment. Despite a gross profit margin of 61.1% (SIXTY-ONE PERCENT!) the company's overhead expenses nearly matched its top-line sales, indicating significant operational inefficiencies.​

Let me be clear, Solo Brands spends $1 in overheard to generate $1 in gross sales.

Solo is on its 3rd CEO since the 2021 IPO, and he is on a mission to keep the company afloat while facing an almost definite restructuring. Not even Snoop Dog could change the tide. While this marketing campaign was well received, it did not result in an increase in company sales.

It seems obvious to me that the Solo Stove company 1) should not have been part of a roll-up strategy, and 2) should not have needed to go public.

The disparate nature of Solo Brands' acquisitions poses significant integration challenges, even today. Each brand operates in a distinct market segment with unique customer bases and operational requirements.

For instance, the marketing strategies and supply chain logistics for a metal fire pit manufacturer differ vastly from those of a textile apparel company or a molded plastic kayak producer.

Not to sound naive, but Solo Stove, on its own, should be a simple business to run.

The company's recent financial performance underscores the challenges of managing a range of diverse brands, particularly under the spotlight of the public markets.

Yet, I’m still going to throw another log on the fire. Solo Stove is a great product. It’s sleek, clean, and looks great. I love relaxing by the fire, engaging in conversation with family and friends. The kids love smores. I hope today’s management team has the guts to right the ship - maybe divest a few pieces - and keep the fire roaring.

Thanks for staying until the end. Your reward, a dancing robot: