Quiksilver Takes a Tumble

Shares in the surf and ski-gear maker fell in post-market trading Thursday after its earnings guidance disappointed the Street

Shares of youth apparel maker Quiksilver (ZQK) tumbled 12% to in after-hours trading Mar. 8 after the company -- best known for its Quiksilver and Roxy surf and skateboard togs, along with its Rossignol ski gear -- announced a lower profit for the its fiscal first quarter that came in below Wall Street expectations.

In the quarter ended Jan. 31, the company reported net income of $2.5 million, or 2 cents a share, on net revenues of $552.5 million, vs. year-earlier earnings of $18.6 million, or 15 cents, on revenues of $541.1 million. Quiksilver had cut its guidance for the quarter on Feb. 9 to 4 cents per share on revenue of $540 million, citing unseasonably warm weather and poor snow conditions in the U.S. and Europe.

Investors headed for the lodge after the company revised its fiscal 2007 guidance for revenue to $2.45 billion and for EPS to around 53 cents.

"We are obviously very disappointed with our recent results and our guidance revision for fiscal 2007" said Quiksilver CEO Robert McKnight, Jr. in a Mar. 8 press release. "Feedback on the wintersports season, which was the worst in decades, has further deteriorated over the last several weeks."

No snow means lousy business for ski-gear makers. Quiksilver cited "poor reorders, heavy markdowns, and a significant reduction in the order book for next season" said it expected the effects to continue throughout the year. Quiksilver's inventories increased 19% to $485.3 million at Jan. 31, from $406.5 million a year earlier. Receivables climbed 15% to $612.9 million at Jan. 31, from $533.5 million a year earlier.

"On a more positive note, Quiksilver, Roxy and DC continue to prosper, all meeting or exceeding plan, and we remain excited about the significant growth opportunities that still exist," McKnight said.

Company president Bernard Mariette said Quiksilver would step up cost-saving efforts. "In fiscal 2007, we will further streamline our operations, institute a global sourcing initiative, and take advantage of opportunities to extend our product lines, deepen our distribution, and create new vehicles for growth," he said in the Mar. 8 release.

Quiksilver got its start selling boardshorts in the early 1970s. The company's thrust has been to grow beyond its original board-culture roots through acquisitions. In fiscal 2005, it acquired Rossignol to add a presence in winter sports and golf equipment.

"We think Rossignol will provide Quiksilver with multiple platforms for brand extensions and new categories in the estimated $50 billion global outdoor sporting goods market. We see an opportunity for the company to create Rossignol into an active outdoor lifestyle brand along with its siblings, Quiksilver and Roxy," wrote Standard & Poor's analyst Marie Driscoll in a Dec. 21 research report. (S&P, like BusinessWeek.com, is owned by the McGraw-Hill Companies.)

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