Helmet maker Xenith restructures after hit from youth football cancellations

Xenith LLC was lined up for a record revenue hike in 2020 before the coronavirus pandemic blitzed its business. Now it's trimming and pivoting its business to cross the goal line.

The Detroit-based football equipment maker was forced to lay off between 30 percent and 40 percent of its staff in recent weeks and draw up another new business model in its hunt for profitability.

"There's 16 states that aren't playing high school football this fall, our home state of Michigan being one of them," CEO Ryan Sullivan told Crain's Detroit Business. "Not only has participation been heavily impacted by COVID, but also budgets. Football equipment as a budget line item is not the same priority that it has been in years past.

Sullivan said revenue at the company, owned by real estate investor Dan Gilbert, is expected to be down 10-30 percent this year. Prior to the pandemic, the company was projecting sales to be up 35 percent year-over-year. The company does not disclose revenue. Crowdsourcing data site Owler estimated it to be $5 million in 2019.

"Think about what a swing that has been for us," Sullivan said.

Xenith made its name by designing helmets with shock-absorbing technology meant to minimize concussions. Its helmets have been worn by a few dozen players at the NFL and NCAA levels. Its Shadow XR helmet debuted in January as its most successful product launch to date. It also makes shoulder pads and other equipment.

The professional and college markets are dominated by behemoths Riddell Sports Group and Schutt Sports. Xenith's primary customers are youth football leagues, including in the Detroit Public Schools Community District. For the most part, those leagues are being sidelined due to COVID-19.

Although the pandemic has plunged Xenith deeper into the red, it has been able to sustain the blow thanks to the deep pockets of its owner. Gilbert, who bought a majority share of Xenith and moved it to Detroit in 2015, recently infused an undisclosed sum of money into the company.

"We've made all the necessary changes to our business for the foreseeable future," Sullivan said. "We have support from our ownership group for this new business model that we have going forward, so we're very confident in the outlook of the business model."

Given the competitive market, Xenith does not see a sustainable future in football helmets, though it has no intention of abandoning its flagship product. Last year, the company started a line of sportswear in hopes of penetrating a $174 billion global athletic apparel industry literally a thousand times the size of the football helmet industry.

It scrapped that approach as part of its restructuring. It will sell its remaining inventory before diverting resources to a new clothing product: sublimated jerseys.

The company is refocusing on youth sports, where it has seen the most success, and aiming to outfit leagues with another element of their uniforms. Sullivan said the company has more than 15 jersey-making contracts from programs around the country.

Xenith teamed with local artists Ndubisi Okoye and Allen Largin to make jerseys for Martin Luther King Jr. High School and Cass Tech High School, both in Detroit, whose seasons have been postponed due to COVID-19.

More than half of the company's revenue still comes from helmets, but that is expected to shrink as its other products gain traction.

Around 100 workers remain employed at its 66,000-square-foot warehouse near downtown Detroit.

During the pandemic, the company launched a business-to-business digital platform to make it easier for customers to buy products in bulk. It also invested in digital marketing after losing all of its physical events-based advertising platforms because of the coronavirus pandemic.

"Our e-commerce business has been growing phenomenally, both our Xenith.com as well as other distribution channels, such as Amazon and Dick's Sporting Goods online, so that has been a strong growth area," Sullivan said.