Walking the Big Dog

Santa Barbara — In his June 14 column, The Motley Fool’s David Meier mused on how Santa Barbara-based Big Dog Holdings, Inc. earned returns of 290 percent over the past three years, making it one of the nation’s top three retailers, right behind GameStop in second place and Guess in first. T Meier singled out Big Dog Holdings for knowing when to stop investing in its original line of products, Big Dogs Sportswear.

Not that those tee shirts and shorts bearing the St. Bernard mascot, and working the neo-capitalist slogan, “If you can’t run with the big dogs, stay on the porch,” are still going strong, with 167 stores nationwide, according to the company’s website. But in 2004, Big Dog Holdings redirected most of its profits into The Walking Company shoe stores, acquiring them when they were faltering and turning them around, according to Meier. Case in point: Big Dog opened a new Walking Company store in Paseo Nuevo in late May, in addition to the La Cumbre Plaza location which was the first Walking Company store that Big Dog collected.

“So far,” Meier wrote, “the market likes the idea of allocating capital from a declining business [Big Dog clothing] to a growing one that should start increasing its return on invested capital as it expands.” Besides giving Big Dog Holdings the prize for “milking a mature business to grow a new one,” Meier honored Guess for exemplifying the principle of pleasing the people, and GameStop for the savvy strategy of getting big in a fragmented market.