Walker Webcast: Brand-building with Authenticity: A Chat with Stephen Sullivan of Stio


Stephen “Sully” Sullivan is an entrepreneur and expert in the outdoor, snow sport, and fly fishing markets. In addition to being an avid angler, skier, trail runner, cyclist, and rancher, he is the founder and CEO of Stio, an outdoor apparel brand that will exceed $100 million in revenue this year.

I recently had the chance to chat with Sully about how his love of mountain life has translated into building an authentic brand.

Building the Stio Brand

When Sully launched Stio in 2012, he had a great combination of both the experience of working in a retail setting and launching Cloudveil, an apparel brand that preceded Stio.

Perhaps more importantly, however, he had a real love of mountain life that dates back to his childhood. That love is the foundation for Sully’s vision and Stio’s mission.

When Cloudveil was acquired by another company, Sully realized that the acquisition was all about segmentation for the acquiring brand. He wanted Stio to be about something much different.

Wholesale vs. Retail: Embracing a Customer Mindset

Sully realized that being in a wholesale business distances a company from its ultimate customers, and he did not want that for Stio. He noted: “When you’re in the wholesale business, you have middle men between you and the customers. You sell eight months before you deliver the product to the real customer. That means you may not get feedback on your products for over a year.”

In a retail setting, he noticed that customers were buying much more interesting, differentiated products. He wanted to build a brand that allows customers to decide what they really want. He knew that is where Stio would shine.

He found that wholesalers and big box retailers were looking to buy items that gave consumers another choice in the hardshell, softshell, fleece, and base layer categories. This meant he would need to take a different approach to distribution if Stio was to sell truly differentiated products.

Retail Locations and Catalogs Form a Foundation

Sully set out to launch a more creative product line that encompasses the totality of mountain life and that gives customers an opportunity to really decide what they want. He knew he needed brick and mortar locations to do that.

Building a strong customer base via retail locations solidified the brand in a way that online channels only simply would not. Online distribution is a fast and easy way for the consumer to shop, but it lacks the personality and haptic nature of touching a piece of clothing or catalog. That’s why Stio has continued to regularly publish catalogs and open up retail locations in key locations where outdoor enthusiasts flock.

Authenticity: It’s All About the Mountain

The outdoor apparel industry is very competitive, with independently owned brands such as Stio competing with giants in the space such as The North Face, Patagonia, Helly Hansen, and more, some of which are owned by large international conglomerates.

Unlike many of its competitors that are based on coastal towns, Stio is based in Jackson Hole, Wyoming, one of the largest ski towns in the U.S. Stio is a true mountain company. The entire foundation of the business is built around mountain life. Sully revealed that many of Stio’s employees (including himself) ski on nearby mountains 80-100+ days per year, in Stio gear, of course.

Sully believes that is the key to Stio’s continued success. He noted: “That perspective of having this inherent authenticity of literally living this lifestyle every day really resonates with our customers. We live this in our daily lives. All those things of being involved in that mountain community makes for an authentic experience. You can’t fake real.”

The brand stays true to its mountain roots in product choice and design. For example, when asked why Stio has not moved into offering hunting products as so many of its competitors do, Sully replied: “We haven’t moved into hunting because we could not be authentic in that market. It’s not what we’re about.”

Staying Competitive in a Crowded Field

Stio has been able to stay competitive in such a tight market by building a brand with inherent authenticity, and that authenticity figures prominently in every business decision. In an industry where the direct-to-consumer model is very challenging, Stio has cultivated lasting relationships with its customer base, allowing direct-to-consumer to remain a large portion of its distribution.

Sully observed: “We can compete with big guys because we have built a brand of inherent authenticity and people are resonating with that. We’ll have north of $100M in revenue this year. By extending our category range, staying ahead by innovating new products, keeping our distribution tight, and continuing to be extremely good at direct-to-consumer marketing, we will continue to grow.“

Want to Hear More?

Every week on the Walker Webcast, Willy Walker interviews some of the foremost experts in industries across the broad spectrum of American enterprise. To hear the full story of Sully and Stio, be sure to watch this week’s episode of the Walker Webcast.

Webcast Transcript

Willy Walker: Before I dive into my conversation with Sully, just a couple of quick things. Many of you tuned in last week to hear my conversation with Michael Arougheti at Ares about the banking crisis, about the Fed rate decision today, and a bunch of other things. If you missed that, I would strongly suggest going back into the archives and pulling that one out because Mike was incredibly insightful as it relates to the credit markets and what's going on today. It's obviously nice to see some stability in the banking sector, and most of the regional banks traded on the New York Stock Exchange and the Nasdaq were up quite strongly yesterday after Secretary Yellen's comments about deposits implicitly, not explicitly being guaranteed by the federal government. Should we have another bank failure? I at some point we'll have someone on to discuss and debate that policy decision and where we actually find ourselves from the safety and soundness of the banking system and the risks that people will take or not take as it relates to that implicit guarantee. But we'll get to that at a future discussion.

All eyes are on Chairman Powell today to see what he does. I think from many, many conversations on this topic with lots of experts and trying to listen as carefully as I can. If we get 25 basis points, everyone should take a sigh of relief. 50 would be a little bit strong and following the lead of Europe and many people thought that Christine Lagarde and the ECB had gone too far on their 50 basis points last week and as much as zero and no change might rally the markets, what I have heard is that that might say that the banking sector is more fragile than many of us suspect, and that if the Fed were to pull back that dramatically, that that actually is probably a pretty bad sign for the overall markets and the health of the banking system in the United States. But we will keep watching that going forward and have plenty of discussions on it in future Walker Webcasts.

Today, we turn to a very different topic. We turn to entrepreneurialism. We talk about the outdoor clothing industry. We talk about the out-of-doors. We might get to talking about climate and what's driving the change in our climate and some other things.

My guest today is Stephen “Sully” Sullivan. He is an entrepreneur and experienced chief executive with a long professional tenure in the outdoor, snow sports and fly-fishing markets. He is by his own LinkedIn page - a skier, angler, cyclist, trail runner, rancher, and apparel guy. I like Sully that all those other things come in front of being an exceedingly successful apparel guy and we'll get into that. He is the founder and CEO of Stio® and he also happens to be a “youth sports transportation professional.” And we'll come back to that as a qualifier in a moment. Many of us, I think, have become youth sport transportation professionals throughout our lives.

So, Sully, first of all, welcome. And second, let's start here. We will, rewind the clock a little bit and begin with your family moving from Ann Arbor, Michigan, to Grand Junction, Colorado, when I believe you were ten. Talk about your green tracksuit and how that pulled you towards the apparel industry.

Stephen Sullivan: Willy, thanks so much for having me. It’s super fun to be with you today. When I moved to Colorado, I was going into fourth grade, and I really felt that I wanted to kind of have a uniform. I probably should have gone off to some prep school or military school like my dad, my grandfather had, because I really like the idea of having a uniform. And I, I fell in love with this green Adidas tracksuit that I forced my mom to buy me. And I literally wore it every single day of fourth grade. And it became kind of my persona at school that I was the green tracksuit guy. And I think it was also a way to just kind of stand out a little bit and meet new people. It did it really in some odd way, lead me to this idea that apparel had such an impact on your personality and in your life. And so, I think that was probably a part of the genesis of me being interested in the apparel business.

Willy Walker: And then that was combined with a kind of newfound understanding/appreciation for the outdoors. I think it was your uncle who really introduced you to the out-of-doors. Where did the two of you go and what sports did he introduce you to?

Stephen Sullivan: My uncle had actually moved out to Colorado prior to my mom and my sister and me. He was an attorney. He went to the University of Michigan Law School, and he decided that he was going to be the first real ski bum attorney. And so, he moved to Aspen at first. Aspen was really small in the seventies, and he realized that there wasn't a lot of work there. And so, he ended up moving down to Grand Junction, which is where we moved. And he was just an exceptionally avid outdoor guy. He loved to be in the mountains. He loved to hike, he loved to backpack, he loved to fly fish. And we started off doing an annual Labor Day trip up into all the different mountain ranges, mostly around western Colorado, in the San Juan. And when the neutral wind is down there in Durango, around the Gunnison area. We did backpacking trips every Labor Day and that started to extend into my uncle and I starting to climb some fourteeners together. And he's the first person that taught me to fly fish. And it just really opened my eyes, especially coming from a kid that was living in a fairly urban kind of setting in Ann Arbor. I was a hockey player and a soccer player when I was a kid. And when I moved to Grand Junction, there was no hockey, and so I was super disappointed. I think I never let my mom forget that, actually. But I got into skiing instead and got into hiking and then climbing. And so that move to Colorado is what really kind of opened my eyes to being out in the wilderness.

Willy Walker: I think it was your uncle's girlfriend who had a retail store that was your first job and your first real exposure to retail? What did you learn either about work or retail in that first job at Lewis and Clark?

Stephen Sullivan: Lewis and Clark was arguably one of the first probably 40 or 50 true outdoor retail stores in the United States. And my uncle's girlfriend, Betsy Clark, had started the store. The store was mainly focused around hiking and cross-country skiing. Those were the two big activities and I just fell in love with the whole process of helping a customer find something that they could use in the outdoors that was going to serve them, whether protect them from the elements or a ski that was going to work for them the best. And I really fell in love with retail, and I learned a lot of lessons from Betsy. She was an extremely good retailer and operated that store for ten or 12 years. She actually moved on from that and became a lobbyist in the state legislature for the outdoors. And so, I think it just sparked the love I had of connecting with people around kind of common outdoor activities. And that led me to moving on into more work in more outdoor retail as I went through college and then into my time in Jackson.

Willy Walker: So, I'm going to run through a little bit of your history that gets you back to Jackson. You were a biker and you worked in a bike shop, so you got some exposure to the biking world. Then you went to Fort Lewis College, you moved to Boulder after college and worked for Wave Rave, and then you moved to San Francisco for a year and then you said, “enough of this” and were you following your surfing passion, Sully? I think you really liked surfing. Surfing is one of those sports that is not part of the Stio lineup, it's not part of anything that you've done with your life. But weren't you a passionate surfer as a teenager?

Stephen Sullivan: I got into it when I was about 19. I was a passionate skateboarder when I was young. I like to be into all sorts of different activities, but I was really into skateboarding and in college I started dating a girl, Isobel Estes was her name, and her family was from San Diego. And so, I ended up spending three summers during college in San Diego, and I was a self-taught surfer, which is a horrible way to learn to surf, by the way, because you just get beat up. But it's also a good way because you learn a lot. And then when I moved out to San Francisco, I surfed quite a bit at O.B. and down in Santa Cruz. And I love to surf, but I also think it's the hardest sport to learn and you have to just put so much water time in. I still go on trips with a group of guys here, usually once a year and get to some cool destination where we can get a week or two in.

Willy Walker: From all your products, we're going to jump. I'm going to jump ahead and then come back. On Stio, like Patagonia, has some surfing products and surf shorts and things like that. Did you focus on surfing at all?

Stephen Sullivan: No, we have a water collection, but it's principally focused on mountain. You know, our whole company is based on mountain. Patagonia is based in Ventura, California. And it's a surf culture kind of backdrop to that whole brand. But we do talk about now there's a whole movement of surfing on the rivers. And so, we do make a product that is a very versatile water sports type product that you can use to surf on the rivers. And that's become a huge thing here in Jackson, surfing the Lunch Counter rapid down on the Snake River. Full disclosure, I've not yet attempted.

Willy Walker: I have a 20-year-old son who's a big skateboarder, and he comes down here to Denver and goes to the reservoir and hits the outtake of the reservoir and surfs for hours and hours and hours with his friends. So clearly get that. So, you moved from San Francisco back to Jackson. You taught skiing for a period of time. You worked in retail stores, you worked at skinny skis, and then you founded Cloudveil with some friends. I've heard you talk about the Cloudveil experience. And I think the thing I want to understand more, first of all, would you explain that many people who know Stio may not know Cloudveil because it's a more of a niche brand. So, explain a little bit about the products that Cloudveil made and then I've heard you talk about the PE hamster wheel. So just talk through for a moment – forget about the ups and downs of Cloudveil and how it all ended, but just why you deem that experience of Cloudveil the PE hamster wheel.

Stephen Sullivan: Well, Cloudveil was started by myself and a guy named Brian Cousins, who is still a dear friend of mine. And we were exceptional business partners with total yin and yang. I am much more of a creative kind of product, visionary kind of person. Bryan is extremely strong on the ops and finance side. We started that brand with $100,000 in the bank. And so, we cashed out a couple of 401ks and we absolutely had zero idea what we were doing. All I knew is that I had found a textile that a friend of mine had brought back a pair of pants from Europe, and I'd found this textile that I thought wasn't on the market. I thought there was a gap in the market, and it was really the beginning of the whole soft-shell kind of category of apparel. We got about five years in and we self-funded. We were very fortunate to have some friends and family that invested in us. Brian's dad was good enough to put up a CD at the bank so that we had a small kind of stealth ABL, and we were able to get the business up to a certain size. But we were seeing a tremendous amount of momentum and we just didn't have the capital. And so, year five, we went out and did a private equity deal and we actually did it with a very small new PE fund. Two principal guys, John Boris, and Michael McGregor, who are both still friends as well. And that was what led to Cloudveil starting to grow pretty rapidly. And we got a couple of years in, and everybody started getting a little more panicky because we kept outgrowing our working capital base. We’ve been getting a lot of interest from companies. And so, we were approached by a group called Sport Brands International that was a holding company, of Cerberus Corporation. Sport Brands International owned FILA. And they also had a couple of small European women's brands called JSA and another brand called MotionWear. And they wanted to plug us into their platform. And I was the only abstaining vote. I did not want to do the deal and because I felt it was too early and etc.. But anyway, we did the deal and that really started just going through, having to transition and change all of our systems and relook at our whole team. And then two years into that FILA actually sold to the South Korean distributor. And so, they disbanded Sport Brands International. So we were technically without a home, although Cerberus was still helping fund us at the time. Then we went off and found a new partner in Spyder ski wear who I'd actually spoken to previously. Irony abound it because during my time in Boulder, I had actually spent a couple of months working in the warehouse at Spyder, 14 years prior to this. And so, it was pretty funny. And I knew Jake Jacobs and Dave Jacobs. Dave was the founder and Jake was his son, the CEO. That was actually a pretty damn good deal. We had very similar cultural backgrounds and it was going very well. We transitioned and kind of conjoined very well. But very quickly, the parent company of Spyder decided they wanted to try to sell the whole thing. And this is in 2008 when everything is not going so well, and they had a deal and that ended up falling through. And then basically Apex Partners, that was the lead private equity fund came in and just decided that all the Cs in the organization on the spider side weren't doing a great job. And so, they brought in Alvarez & Marcel and I had just gone through a transition and I got into a transition service company and started running around and trying to change everything again and the new CEO of Spyder came in and offered to let me try to buy Cloudveil back. And I spent about seven months trying to do that with a great financial partner who is my lead investor today. And we got left at the altar and that was that. So, I definitely learned a lot, though. It was a great learning experience.

Willy Walker: Yeah, I mean, you talk about some pretty big names and some pretty big brands in there, private equity firms and things of that nature. And I mean, here's an apparel company that was founded in Jackson Hole, Wyoming, that all of a sudden is sort of on the international scale, international investors, international brands. And we're going to talk about the competitive landscape in a moment, Sully, when we get into Stio. But let's fast forward to Stio and you founded the company on my birthday in 2012, and not that my birthday had anything to do with you founding it, but I just thought it was interesting that April 5th was the day that you actually launched Stio. You launched it to have a direct connection with customers and you wanted to launch a B2C brand. And we're going to talk in a moment about all the other things that are in the Stio brand. But just so I mean, after that experience with Cloudveil, my question is, what was it that made you wake up one morning and say the world needs another outdoor apparel brand? I mean, there was Patagonia and there was North Face and there was Helly Hansen. And we're going to talk about that competitive landscape in a moment. But what was it that said, I can win here? I can make a differentiated product, which you have done, but I'm just trying to rewind to 2011, 2012, on April 4th, the day before you launched it, saying we can make this thing run.

Stephen Sullivan: You know, I think there was a lesson in the Cloudveil days that was very eye opening to me. As that the Cloudveil business evolved, retailers started just buying us for segmentation, right? They'd just buy your hard sell your soft shell, your fleece, your base layer, whatever it might be. And they weren't buying our more creative product. But we also had one retail store during the Cloudveil days here in Jackson, and we found at that retail store that customers were buying the more interesting product. We made some fairly eclectic products that had a Western flair, might have something, but it was still outdoor, There was something that stuck in my mind that I wanted the customers to start deciding what to buy. When you're in the wholesale business, you've got the middlemen of your internal sales team, your sales reps, and then you go to the retailer and then you go to the customer and you sell in eight months, before you deliver the product and then you deliver the product and it has to sell through for three or four or five months and you don't get any feedback until literally over a year. There's a year's gap there. And I felt like there was an opportunity to launch a more creative line, a line that also encompassed more of the totality of mountain life. So Cloudveil was mostly about the top of the mountain, and Stio is more about the totality, the mountain life, everything from the boardwalk to the top of the mountain. And I also felt there was an opportunity to let the customer decide what they wanted. And that's what really drove me to start Stio and to start Stio in a direct-to-consumer business model.

Willy Walker: So, you opened on day one, a retail store, you published a catalog, and you also launched your website. I mean, it sounds like that was very different from Cloudveil in the way that you distributed Cloudveil. I'm assuming that that required more capital at the start, which is one of the reasons why, if you will, you had an advantage of both the experience as well as the capital you had to be able to put in to be able to open up a store at the same time as do the catalog and also do the online presence and then also obviously make the product?

Stephen Sullivan: Yes, I had street cred, and it was my second rodeo, not my first. And so, I actually went out and raised a significant amount of capital to start the business. The direct consumer business is quite a bit more expensive as a launchpad than it is to start a wholesale business. So, I knew that I needed a certain amount of capital to kind of get proof of concept kind of through the first 18 months. And then I would go out and raise more capital. But I think you keyed in on something that was really important and to me that doing all three of those things at once was incredibly impactful, I think, for our brand, because I was really concerned that if we didn't have that brick and mortar physical presence and we also have the advantage of being a town where I happen to know everybody, I got a great retail location. We get 5 million people through here a year, so there's a customer base. And I felt like that also kind of solidified the brand more so than if we were just a digitally native direct consumer business out there, you know, and product. We actually have a physical location you could come visit and I think that made a tremendous impact as we were starting. Now we have, we're actually opening our ninth store tomorrow in South Lake Tahoe and have another one in Bozeman under development right now. And so, brick and mortar was a kind of a foundational piece of the puzzle for me, even though it's a very small percentage of our overall sales. It's only about ten or 12% of our overall revenue. It's still super foundational to the experience of the brand.

Willy Walker: Catalogs are super important and the amount of sales and customer acquisition you get through catalogs is still, I believe, your highest channel. And then you've got your website and then you've also got the stores. I've heard you talk about sort of the haptic touch that the ability for the consumer to actually kind of feel the product, understand what the product represents. How do you do that in your online presence? I get it. Someone's looking at a catalog and turning the pages. I totally get it going into the retail store. But what have you done online, if you will, to create that sort of customer experience that gets the Stio brand?

Stephen Sullivan: I think the online thing is just quite a bit different. I think you need to provide a broader range of content online so you obviously can't get the physical haptic touch like you can when you touch a catalog or when you touch a product in a store. And so, what we've focused on our website is creating a lot of content around each product and around our brand so that people understand where we're coming from, and they understand the product and kind of our point of view and whether it be the product innovation or whether it be the product style or whatever it might be. But it is much harder in the digital world to kind of create that same type of environment. It's also quite expensive. You get into a lot more production costs and catalog is still the biggest driver for us. We're a very heavy cataloger – it's still our best customer acquisition tool. We have our best lifetime value with catalog customers and people really look forward to it now.

Willy Walker: I love your catalog. It's fantastic. I guess the question I'd ask Sully is this, the Patagonia catalog has been around for decades. Many people look at the Patagonia catalog not to buy the clothes, but to look at the fantastic photographs. How did you say we're going to differentiate ourselves from that and that image that Patagonia has been able to create in their catalogs to make a differentiator for someone to actually want to buy Stio?

Stephen Sullivan: I think that gets into a little bit of the title you kind of presented for us and that is we are a mountain company. We're the only company of the size and scale we are today based in a mountain community. Now one great thing about the pandemic for me is it opened up the distributed workforce. And so, we have about half our corporate employees live in Jackson and half of them live around the rest of the country now. But it has plenty of challenges. But I think that the whole foundation of our business is around mountain. And so that's like the key word in our vocabulary. Most of the other apparel companies in our space are not based in mountain communities, and a lot of them are based in coastal communities. And so, they come from just a totally different perspective than we do. And I think that perspective of literally having this inherent authenticity by literally living this lifestyle every day. I skinned up the king this morning before this podcast with one of my new employees who's a great new product line manager that we just hired. And I can't tell you how much that resonated with him, and it was just the two of us. We invited a bunch of folks and only the two of us showed up and, and here's this guy that's fresh out, just starting and he gets to go skin up snow king. It was great skiing this morning, by the way.

Willy Walker: And I'm jealous.

Stephen Sullivan: And there's just this inherent authenticity because we live this in our daily lives. You know, I'm on skis 80 to 100 days a year on average. And it's just because a lot of it is just a quick skin up Snow King like my daily workout and I fish, I mountain bike a ton and I hike, and I trail run and so I think all those things because our entire team is involved in that mountain community. It makes for a better product, and it makes for a more real experience. You know, the classic statement that you can't fake real, really is what we live by here.

Willy Walker: So those are two of the advantages of being in Jackson Hole. Talk about some of the disadvantages of being in a small mountain community. Jackson has a great airport, so accessibility isn't as challenging as it would be somewhere like Sun Valley, Idaho, or others that are harder or Aspen. But the cost of living is extremely high. Taking snow days, I'm assuming, happens on a very frequent basis. So, what about the downside, if you will, of being in a mountain community?

Stephen Sullivan: I don't consider the snow days the downside.

Willy Walker: Nor do I. Nor do I. But if I was trying to get a project done, I think I would look at it differently.

Stephen Sullivan: Yeah. The downside is that the shine is off. The shine is off on the Jackson Holes and Aspens as far as a place where you could actually go and live and have a real meaningful career. We have a ton of exceptional employees that don't live here, and I wish they could, but our median home price is $2.5 million. So, we do have a good contingent of folks that live over in Victor and Driggs, Idaho, which is, as you know, right over Teton Pass from us. And that is quite a bit more affordable, but it's still not affordable in the relative context. And so there is a huge challenge now, I think with the distributed workforce and everything that's happened in the last couple of years of getting that quality day to daytime together, because I think so many ideas get germinated and find their place through that daily connection. And so, we spend a lot of time facilitating team interaction, whether that's both online and then we also on a quarterly basis, make sure that each one of our individual teams are getting together no matter where they're coming from. We are absolutely blessed with the airport service here. I mean, we have direct flights to 12 major cities from Jackson. So, it's fairly easy to get in and out of here, except for the weather, obviously, on occasion. But that's really what we've done as the workaround is to just really try to push to facilitate this team interaction.

Willy Walker: So, before we move off of being based in Jackson and sort of the early days, because I want to move next into just the products you have and the colors and the branding and the competitive landscape and all that great stuff. But given the banking crisis going on in America right now, I was watching CNBC this morning and my friend David Faber was sitting there talking about some of these regional banks and he was sort of saying, you know, these market caps are insignificant. And I'm sitting here in my mind going, Well, that's because they're under massive pressure. First Republic has fallen from a multi $10 billion company down to I think it's got a market cap of $4 billion today, maybe might be a three. But the point being is that these banks are fundamental to entrepreneurship and to startups like you did with Stio. Did you have a banking relationship in Jackson that helped you as you grew the company and had to go to a local banker and say, you know, I got to extend my line of credit or what have you. You said I think it was the father of your founder of Cloudveil, who put a CD up again so that you guys could borrow against that and get a line of credit. I'm assuming that there's some bank in Jackson or regional bank that you all have used consistently that has been sort of the lifeblood of the growth of Stio. Is that a correct assumption?

Stephen Sullivan: No, we had first banked locally with a US bank. We raised a pretty significant amount of equity over the course of the first four or five years which funded our growth. We could not get an ABL, and the reason was we didn't have any purchase orders or receivables because we were a direct consumer business. So, we got our first ABL in 2016 or ‘17. We actually bank with JPMorgan and they've been a tremendous partner, came very close to doing a deal with Silicon Valley Bank a couple of years ago and exceptionally thankful we didn't.

Willy Walker: Hindsight’s 20/20 vision. I love it. That's great. And obviously you had the size and scale to get JPM to pay attention too.

Stephen Sullivan: Yeah, and they've been an unbelievably good partner. Very creative, very attentive, just a really great partner. Really great people, really have enjoyed the relationship. In fact, all of our main guys were out here just last week, and we took them skiing at the mountain and they actually really ponied up on the skiing, too. We got a couple of head wall laps and an out of bounds lap with them and the whole deal.

Willy Walker: This is a great PR plug for JPMorgan. I'm assuming that you are the JPMorgan Team’s favorite client. They're like, oh, let's go check in on Sully and Stio, got to make sure that our line of credit is in good shape right now and they're sitting in the office going: this thing is gold, but we still can go out there and pay them a visit and make some laps in Jackson. I love it.

Stephen Sullivan: Yeah. There does always seems to be skiing, fishing or mountain biking involved.

Willy Walker: Great. So, let's talk for a moment about Stio, the products, the scale, and the competitive landscape. So, you have I believe, 250 different products, if you will. I heard you use a term in another interview where you called them styles, but so you've got 250 plus styles in skiing, snowboarding, hiking, running, biking, climbing, lifestyle, fishing, and paddling. And as you have said a number of times, Sully, it's really that mountain focus that really differentiates the Stio brand. As I think about mountain, I also think about hunting. There's an ad that's running here in Colorado that says that the hunting and fishing industry brings as much into Colorado as the ski industry does. And I'm just curious, the hunting vertical, no interest in going into it, a difficult one to penetrate, or isn't consistent with the Stio brand?

Stephen Sullivan: I think all of the above. We just don't have a lot of hunters in our organization. And although I have absolutely nothing against hunting and have plenty of friends at Hunt and have done a little hunting myself, it's just not core to what we do. It's also very hard to penetrate. You have to be very authentic in going into that market. And if you look at the brands that are really successful, like SITKA and KUIU, those are extremely authentic brands. All the products developed by hunters and we're not hunters. And so that's why we haven't moved into that focus at all.

Willy Walker: So, one of the big differentiators of Stio is your colors. And I love your colors, I absolutely adore them. But I also have a 20-year-old son who is a skier, snowboarder who typically wears baggy black on black and probably would never get caught dead at his age wearing a steel lime zest, exploit hooded jacket. How do you differentiate, if you will, of what the target market is and what the colors and styles are, and saying, you want Willy Walker versus Jack Walker as a client of Stio?

Stephen Sullivan: We're just starting to get into customer segmentation in our collection, we focus on really clear, crisp, bright colors. And that's been something that's been kind of a foundational part of our range. But we are starting to move, like I have a new collection called The Figment that next year I will make sure Jack gets a set up because you'll get it when you see it. Like it's definitely more targeted to a younger consumer. The more freeride consumer, the colors are more muted and more neutral. And so, the customer segmentation to us, we've really focused on building our collection first and then what you see which customers kind of resonate with it. And now, we have a tremendous amount of knowledge about our own customer base. And so now we can start looking outside of that, you know, the next real target market for us, our average customers between 35 and 55 years old and they have a certain level of disposable income and education and all the rest of the metrics. We are now starting to focus more on that millennial consumer a little more and trying to pull them up to the brand. So, you do have to start to look at style segmentation and what you can do to draw them into a collection.

Willy Walker: And beyond color, Sully, the fabrics that you use – you list in a letter that I read you know PolarTex, Para-Tex, Toray - you've just done a new deal with Gore-Tex. First of all, I can't believe that Gore-Tex is still around. Not that I know anything about the company or the management of the company, but it felt like Gore-Tex was new technology back in the 1970s, and the fact that Gore-Tex is still innovating as it relates to fabrics is just fascinating to me. They're still innovating and creating new stuff that obviously you think is cutting edge because you just signed a deal with them.

Stephen Sullivan: We did. One of the funny things most people don't know is that Gore-Tex doesn't make fabrics. Gore-Tex makes films, and they make the films that adhere to the fabrics. And so, they actually buy fabric from people like Scholer and PolarTex and Toray, who are the main mills that we work with. But Gore-Tex makes a really wonderful, waterproof, breathable laminate. And so, they also have done a tremendous job of marketing their technology. There's a lot of new stuff going on in the world, too, to eliminate, PTFE films are not incredibly environmentally friendly. They're not very good for the environment, just straight up. And so now they're moving to EPE films. And so, they've been a leader in the sustainability side. That's one of the reasons we were really interested to start working with them. They were one of the first people that used a water based DWR and if your listeners out there don't know what a DWR is, it is the finishing treatment that goes on the outside of the textile, that helps the water bead off and all those solvents that used to be used were incredibly bad for the environment. And so, all the textile manufacturers have moved over to water based and Gore was a leader in that movement. So, we felt like they were the right partner from a marketing standpoint, from a technology standpoint and from a sustainability standpoint. And so, we just started that relationship. This is our second full year working with Gore, we now have an apparel and glove license with Gore.

Willy Walker: And so from a manufacturing standpoint, at least the apparel that I have says Made in Vietnam, is the majority of your clothing made offshore in Vietnam and beyond that, during the pandemic supply chain issues, did that back you up and talk for a moment about the demand for outdoor apparel during the pandemic and either supply constraints that you had or not, as the case might have been?

Stephen Sullivan: The demand for outdoor apparel during the pandemic was unbelievable and we had a tremendous couple of years of growth. The supply chain was an absolute nightmare, and not just from shutdowns in both Vietnam, China. But we build our products in eight countries now, and we basically build products as close to the textile as we can. So, we find the most proficient factory close to the textiles so that we take out the carbon footprint of shipping textiles all over the place. So, we build in Vietnam, China, we do most of our knits in El Salvador and we do some knits in the United States, Canada, Turkey, Cambodia. So basically, we spread it out based on all the logistics around construction of the garment. The pandemic was tremendously impactful, though, from a supply chain standpoint. I mean, basically lead times on the water from China or Vietnam went from 28 days to 128 days. You have to fund that product the entire time it's crossing the ocean. So that's, again, another little plug for JPMorgan, who worked with us really closely during that period of time to actually help us with all the correct funding. And factories were shut down on and off constantly. Transportation to factories was really hard in El Salvador, like the workers couldn't get to the factories. So, we shared the cost of transportation with some other companies to get our workers to the factories. There was just so much creative activity during that period of time just to get our product to market. That was very, very, very challenging.

Willy Walker: And did the direct to consumer (DTC) model help or hurt during that period of time? Because if I walked into Dick's Sporting Goods and you were distributing through Dick's and there wasn't a Stio jacket there for me, I'm like, “well, there's no Stio jacket. I'll go find some other brand.” And I might not have a sort of a negative experience if I've gone and ordered directly from you. And I thought it was going to come in two weeks and it is coming in two months, I might have a sort of a negative feeling about Stio. Did that actually hurt or help you in the sense of having that direct relationship with the customer?

Stephen Sullivan: I think, well, first and foremost, we don't put any product up for sale on our website until it's ready to ship. And so that's huge. Some people do preorder. We just don't do that because we think it's just we want to surprise and delight customers. We don't want them to be disappointed. I think the DTC model helped a lot during that period of time because I wasn't encumbered with the fact that I had to ship to all these retailers. We can adjust our marketing somewhat on the fly to some extent. You know, there are pretty long lead times on things like catalogs, but a lot of our digital marketing, we can adjust on the fly. So, if a product didn't show up when it was supposed to and a lot of them didn't, because of this longer lead time, we would just market what we had. We basically sold what we had. And that I think was a huge benefit of being in the direct-to-consumer business because I didn't have that encumbrance of not being able to get my orders out the door to the retailers.

Willy Walker: So, the competitive landscape is pretty fierce. And not that there isn't a strong competitive landscape in every industry and in every sort of niche of an industry. But you're going up against both some very significant brands and then also brands that sit inside of major multinational companies. So, for instance, you know, Helly Hansen is owned by Canadian Tire, North Face is owned by VF Corp and Anta owns Terex and Descente. How as an independent privately held company based in Jackson Hole, Wyoming do you compete with these global companies that have a) seemingly unlimited capital, b) huge marketing budgets, and c) all of those things that we've just talked about of the slowdown in production times and lead times and supply chain issues. I would assume that they were able to apply pressure, get things delivered in a way that potentially because you don't have the scale of them, you couldn't get things done. I mean, it's amazing the success you had. And I'm just fascinated by how you built this great brand going up against such strong competitive headwinds.

Stephen Sullivan: That's a great question and one I get asked frequently. Well, it comes all the way back to how we've built a brand of inherent authenticity and people are resonating with that. I don't think we were on any of their radar until just a few years ago when the business, kind of in the outdoor space and the business started to surpass $50 or $60 million in revenue, like it starts to get on the radar, and we'll be north of $100 million in revenue this year. So, I know we're on the radar now because I hear from some friends and the other companies, but. I think you'll start to see more true competition where people will come, and they'll take harder looks at our product line and try to mimic things that we do really well and try to do them better and cheaper. You know, the classic scenario of kind of what we call R&D in the outdoor industry is the rip off and duplicate. And so, we've countered that by starting to extend our category range. So, for example, we just launched footwear this last fall and we really found we felt like this whitespace in footwear wasn't being addressed and the footwear launch was incredibly successful. So, we just try to stay ahead of it and try to keep innovating and try to keep coming out with creative product.

I think by controlling kind of all of our own distribution, for the most part, we do have about a hundred wholesale partners now and they're all tremendous folks and great partners, but we still control the vast majority of our own distribution. And so that helps a lot in the competitive world. And we're also extremely good at direct to consumer. Our core competency as a direct consumer. We're a very highly analytical business. We have 12 or 14 analysts on our team between inventory planning and financial planning and marketing analytics. And that's what we focus on day in and day out. And we know how to do the direct business really well. I think probably better than most of those other competitors because that was the core competency from the beginning. So, that's a huge strategic advantage for us. And now we have more customers that want our products. And so, like the wholesale business is starting to grow. We're going to launch internationally in the near term. And so, I don't know the magic secret sauce of how we're competing so well or how we've grown the business so nicely, other than to say, I think we build beautiful product from a mountain perspective and we're very good at bringing that to the consumer.

Willy Walker: It's really interesting to hear you talk about that, Sully. As I said, I was watching heard on TheStreet this morning that Jim Cramer was talking about having the two founders of On - the shoe company coming on tonight to his show. And he basically said as he was making a plug for it, Nike should be concerned about On and not as concerned about either Under Armor or Adidas, because On is this niche brand that is going to just decimate Nike. Now, Jim was trying to hype his show and trying to get people to tune in to why On was the brand that so many people are buying. But I see lots of parallels between Stio and On as it relates to a brand that knows what it wants to be. It creates products that it knows their customers want and rather be kind of the broad brand like Nike is of something to everyone. You're much more focused on the product for the client base that you're very targeted at.

Stephen Sullivan: I think that's exactly correct. I'd love to be as big as On. They grew tremendously fast over the last ten years. We were one of the first wholesale dealers On dealers in the United States, by the way. I had a friend from Switzerland that brought a pair over and I got obsessed with them. And so, we carried them in our stores for quite a while until we launched our own footwear. They are a great parallel there. They focused a little more, I think, on the technology of the sole and how that differentiated them. And they've really been able to scale that through a wonderful artistic direction, creative direction, and they've done a great job with their branding. But you're absolutely right. They're very core to who they are. And that's what we are, we're a mountain company. I'm not trying to be an urban company. I have a lot of urban customers that buy our stuff, and we obviously market to those urban customers because we're trying to show them the experience they can have on the mountains. And we think we're the most core authentic brand for that. And so that's our entire focus. And we're not trying to be everything to everybody. We're trying to be a mountain based, outdoor apparel and accessories company.

Willy Walker: I believe that Roger Federer is an investor in On, and it just makes me think about athlete sponsorship. I'm assuming you've looked at that time and time again. I don't know whether you have any athletes that are sponsored, but it makes me think about the brand of Stio, either sponsoring athletes or not, sponsoring teams or not, not sponsoring but supplying mountain professionals like the Jackson Hole ski guides and ski patrol. Talk for a moment about whether either sponsoring athletes or not and then how you push the brand beyond just if you will, target marketing.

Stephen Sullivan: Yeah, we already sponsor a tremendous number of ski areas, we do quite a few ski patrols. We have about 50 ambassadors and our ambassador pool is a little bit different. It's not just focused on pure athletics, although we have people as high up as Paula Moltzan, who's one of the best U.S. technical skiers on the U.S. ski team. She was right there with Mikaela Shiffrin this year. And we have people like that. But we also take it all the way down to outdoor educators and people that come from different backgrounds. It's more about people that exude our lifestyle. We haven't gotten into the focused, highly paid influencer business. I think North Face is probably the most preeminent among those. They have these incredible athletes that have tremendously large social followings. And so, they use that really effectively, all the way up to the Jimmy Chins of the world, for example, who's a friend and a great guy. But we can't afford Jimmy, I can tell you that.

Willy Walker: You could have five years ago, before he made all those great movies.

Stephen Sullivan: I don't know if I could have even afforded him then. He's been doing pretty well at the North Face for quite a while, but I wish I would have booked him back when I knew him 20 years ago. We are starting to look into bringing in some higher profile people and elevating the kind of what we do with ambassadors. But at the same time, what we do, we also have a hometown group. So, we have this program where people can apply to become kind of a junior ambassador of the brand. And that's been really fun and pretty successful at adding influence. It is next step stuff, though. The celebrity/athlete endorsement game is a good one. And these days, because so many people pay attention to social media and the influencers of the world are starting to make real living doing this and they can help really drive a business. It's something on our radar for sure.

Willy Walker: When I think about branding, I think about your pinecone logo, which I got on the back of my jacket right here that's next to my desk, and it's inspired by nature's perfect design. Talk about that for a second on how you picked the pinecone and why it's so important as it relates to what Stio represents.

Stephen Sullivan: The pinecone came about through a number of conversations with the creative agency that we started working with early on TDA down in Boulder. And really when we started the brand, we definitely wanted something that was very tied to the Yellowstone ecosystem. We thought that was really important because it kind of locked us in to Jackson and we really latched on to the fact the white bark pine has become decimated by beetle kill, mainly through the just the simple fact of climate change. And the climate has changed, I believe the climate is changing. And I can tell you just from the time I've lived in Jackson, we don't have those deep 40 below weeks anymore. And that was what killed off the beetle. And once the climate started warming up, you've seen the devastation of white bark pine being killed all over the intermountain west. And so that pinecone is an abstraction of a white bark pinecone. And that was something we really felt like kind of locked us into our place. And so, it's obviously a modern abstraction. We wanted it to be modern. Whenever you're doing a logo, you have to think about all the particulars, like, can it be embroidered easily and will it silkscreen well? or whatever it might be. We really locked into that and that was the genesis of the logo.

Willy Walker: I love how it's on the back and not the front. I'm sure there's been lots of talk, debate, and discussions about where you would place the logo. But I have to say when I'm skiing with other people who are wearing Stio apparel, just seeing the pinecone in front of me is a really, really fun thing. It's almost common to look at it.

Along those lines. Sully, one of your original goals was to build a sustainable business and you have a trade policy that allows people to return their clothes to you and then get a discount on the next purchase. I guess there are two sides of that. One, the recycling effect of having people send back their lightly used clothing and get a discount on their next purchase. But the other thing is do you learn from those returns about what people like and what people don't like?

Stephen Sullivan: I don't know so much that we learn. I think you learn from general returns. More like the bigger e-commerce return bucket, because if you're in the direct consumer business, we average about 18% returns. I mean, that's just how it works. And we do ask for explanations when we have a little form you fill out, was it too small, too big, whatever. We learn more from that. What's been really cool about that is we not just received the trade-ins, but we upcycle all that stuff and we have the Stio second turn. So, we do have a used clothing component to our business. There's a lot of studies out there and we believe just from what's happened in our business that used clothing is going to become more and more prevalent and a bigger and bigger business. And it's also a way to keep that stuff out of landfills. Clothing clogs up a tremendous amount of the landfills in the United States, and we build our clothing to last. And so, when people want to trade it in and maybe go up to the next color or it's a lightly used piece that we can recycle, repurpose, and resell. And we work with a really great facilitator down in the Denver, Boulder area that helps us with that.

We feel like that's just a way to kind of keep the cycle moving. And there have been a couple of people that have really led the charge on that in our industry, and now it's become commonplace. I mean, Patagonia helped lead the charge. The North Face helped lead the charge. Arc'teryx is doing that. We're doing that. I think pretty much everybody's upcycling these days which just makes good sense.

Willy Walker: When you talk about all the competitors and doing something together, is it breakneck competition between you and the other brands or do you collaborate on certain things? I interface with my competitors from time to time. There's some who I'm a fierce direct competitor to and don't really want to talk to and others who are sort of friendly that's who I exchange ideas with. How is it with those huge global brands? Do you interface with them, or do you just keep them at arm's length?

Stephen Sullivan: We don't collaborate with them on anything or really disclose a lot. But one of the great things about the outdoor industry is, it's a very friendly industry. Even if there are small legal disputes, like somebody might use a name that's very common in our industry that somebody kind of accidentally poached one of your names and so you send a nice little cease and desist. But, we've had those issues with people like Patagonia and the North Face and they've all been resolved super amicably. I know a ton of people at Patagonia, and I know a ton of people at the North Face and Arc'teryx and there are a lot of them I've skied with or fished with or done things within the outdoors. I would say when it comes to competition, it's still a very fiercely competitive business and we hold our cards pretty close to the vest. But one of the great things about the outdoor industry is just this kind of camaraderie of the purpose and that we're all making clothes for people to enjoy themselves in the outside. It is a pretty cool industry in that regard.

Willy Walker: Two final questions. One is, I've heard you say that in the next ten years you want to be one of the outdoor industry's top five brands. What's fundamental to that? Is getting to the level where you're hiring those sponsored athletes that we just talked about, and you can get that brand extension and growth? Is it being able to expand internationally in a way that you haven't been able to given capital constraints? What's the area that would make it so you can jump into that top five?

Stephen Sullivan: A little bit of all of the above. I think that because our brand has resonated so strongly and our brand has resonated not strongly just with people in the Aspens and Park Cities and Ketchum’s of the world, but all over. And we mainly market to the urban population. So that's proven to us that the brand is working.

We just opened a store in Boston as an example, and the first three months of that store's existence, it's one of our strongest performers, so it's really exciting to see that. I think moving into the international spectrum is going to be a big part of us growing the brand on a global level. We are completely domestic right now. We do not sell outside of the United States. Europe is a tremendously large market for outdoor goods. South Korea is a huge market for outdoor goods. Starting to get ourselves out and beyond our own little U.S. bubble.

The expansion of I think our retail presence is going to continue to be something that helps us extend the brand as well. We're moving retail stores into really core high traffic markets with a lot of exposure, and that retail presence is a big deal. It’s kind of like the all tides rise theory, right, is if we put a store in Park City, our sales and e-commerce in Park City also go up. It's really cool to watch that. So that'll be another key component to our expansion. But then just keeping it rolling.

Willy Walker: That it is exactly right. So, my final question, Sully, you, and Anna have three kids. And in the bio at the beginning, I said you were a “professional youth sports transportation professional.” I certainly felt like one when my kids were all playing youth sports. Have you figured out how to capitalize that and turn it into a profit center? Because I felt like an underpaid Uber driver for most of my time as a youth sports transportation professional.

Stephen Sullivan: No, I think there is a business there, though I will say that, but I have not figured it out. But my kids unfortunately didn't participate in any school sports. They're lacrosse, hockey players, and ski racers. I think I had a four-vehicle run that I didn't get through the warranty in one year. So, I passed 36,000 miles a year. And that was back when they were all here. I've got one son in college now and a daughter in school back east. And then my middle son is here now. It's calmed down a little bit, but it has been quite a journey all over the intermountain West in the United States.

Willy Walker: Well, it's been a true pleasure. I greatly appreciate you spending the hour. It's fascinating how you have built Stio, Many, many congratulations on having built it so successfully. And here's to you achieving that goal of being a top five global outdoor apparel brand in the next ten years.

Thank you, everyone, for joining us today. I'm back next week with the CEO of Trek Bikes to continue on this theme as it relates to growth of companies. And actually, it will be interesting to talk about Trek and how John took a U.S. brand and took it global. I hope you all will join us for that. Thanks again, Sully and please give Anna my love.

Stephen Sullivan: Thank you. Great to see you, Willy.

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