After dozens of inquiries, Yolles and Galbraith got the attention of Gordon Seabury, the CEO of Horny Toad, a large casual-clothing line in Santa Barbara, California. They felt Horny Toad's outdoorsy image could be a good fit. And they liked linking the Nau brand to the back-office support and infrastructure of a successful apparel maker.
Seabury's initial reaction was lukewarm: "I still wasn't clear about how we could help." But on a visit to Nau's headquarters, Seabury liked what he saw. "The Nau team gave us an unforgettable presentation of what was on the drawing boards," says Seabury. He offered to purchase Nau for an undisclosed sum, trumping the former CEO Van Dyke's bid and several other bids. Seabury agreed to hire Yolles and Galbraith, who would keep doing more or less their same jobs. Nau's line will share Horny Toad's distribution network and is set to be sold in such stores as Uncle Dan's in Chicago and Paragon in New York.
Van Dyke says he has no hard feelings toward Yolles and Galbraith and understands their motivation for wanting to keep Nau going in a new if, in his view, watered-down form. The 5 percent sales to charity, for instance, was dropped down to 2 percent. "It was clear to me the direction of Horny Toad was going to be philosophically different," Van Dyke says. "They did not want to mandate in the bylaws specific corporate giving percentages, as we had done, and they did not want to specify that social and environmental responsibility be part of every major business decision."
The fall line is expected to go on sale in dozens of stores around the country. Yolles and Galbraith no longer expect to revolutionize the retail apparel industry with their sustainability agenda. Nor do they still hope to lead the charge with a massive store expansion. Still, just making a cool line of clothes in an environmentally friendly way seems plenty good. Says Galbraith: "Now we have that second season to prove we were right."
The Experts Weigh In
Keep your own identity
What Nau has done right is that its intention has always been pure and clear. It never let ego get in the way of bringing a sustainable clothing line to the public. It asked, "How do we scale back without compromising integrity?" That it bounced back, distributed in other retail outlets, or just sold its clothing and experience online is all good. If Horny Toad is invisible to the brand and provides it infrastructure and support, then it is fine. If Horny Toad plays a more central role or infringes on Nau's brand in any way, that could be really bad. The Nau brand had more buzz and sex appeal than the Horny Toad brand for a reason.
Better late than never
Nau built a brand and a cultlike following in fairly short order. But it tried to break too many conventions at once, from its mission statement to its merchandise to its distribution model. It didn't take much in terms of hiccups to upset that, and once Nau locked in on a social commitment, that was going to be hard to change. The new plan has a good chance and is arguably what it should have been all along, with a slower ramp-up and a less ambitious plan as well as a bit less philanthropy. Will people come back, and will they do it in sufficient numbers? Nau was a phenomenon. Whether you get a second act as a phenomenon remains to be seen.
Don't try to do too much
Committing to a lease and a build-out without having sufficient cash on hand is pretty risky behavior. I make it a point to have enough cash on hand to cover retail expansions. Nau had big dreams and went for them. But it takes a lot of capital to build out locations and sign leases. Nau didn't understand that the first time, and it seems to be accepting this reality in the second model. But Nau still needs to be careful that it doesn't get ahead of itself and its customers, even within the constraints of Horny Toad. You have to be very creative and flexible about what you have and where you can take it. But it is impressive that Nau has been able to try again.
What would you do?
Could the Nau team have found a way to keep the business independent? Or was the sale the only way to keep the brand alive? Write to us at mail@inc.com, and tell us what you would have done.
