LOS ANGELES — Maybe the surf’s not quite up in China yet, but Quiksilver Inc. is ready to make waves in the retail-hungry country.
The Huntington Beach, Calif.-based maker of surf, skate and snowboard apparel has partnered with Glorious Sun Enterprises Ltd. to open stores and manage the wholesale distribution of its products in China.
About five to 10 stores are slated to open in Shanghai, by late 2003 or early 2004, with locations planned in Beijing and Hong Kong after that. Nicolas Giannoli, formerly chief operating officer of Quiksilver Europe, has moved to Shanghai, where he will be Quiksilver’s managing director of China.
Officials wouldn’t detail the final number of stores scheduled to open in the region or expected sales from the stores.
"[Glorious Sun is] the arms and legs of the operation in terms of wholesale and retail and we give them the brand and connection to the youth market, which is getting more connected to the Western culture through television and music," said Steve Brink, Quiksilver’s chief financial officer. "We think the potential is huge in China. With about 300 million teenagers there, it’s a fast-growing market."
Analysts applauded the move, saying Quiksilver has found a strong partner in Hong Kong-based Glorious Sun, which operates more than 500 stores in mainland China.
"It’s a lot easier to penetrate that market with a partner," said Jeff Van Sinderen, retail analyst at B. Riley & Co., an institutional research and trading firm in Santa Monica, Calif., noting Quiksilver’s cautious expansion approach. "They’re doing this in a conservative, calculated manner by not announcing they’re opening hundreds of stores before seeing the results of their efforts."
Brink said the new Quiksilver Boardriders Club stores will open in shopping and street locations, averaging about 800 square feet compared with typical domestic units that range from 2,500 to 3,000 square feet. Quiksilver and Roxy are the two lines the stores will carry initially, and depending on their success, others, like Hawk, might be added.
Quiksilver has had an Asian presence for about 20 years under license, and just bought out the Quiksilver Asia/Pacific license in December. That represented 35 stores in Australia, Japan and Hong Kong. As of the end of January, Quiksilver had 355 stores domestically and abroad, including 74 in the U.S., 146 in Europe and 100 in licensed territories, like Turkey and Mexico.Meanwhile, as reported, Quiksilver said earnings for the first quarter ending Jan. 31 hit $6.6 million, or 24 cents a share, up from $3.1 million, or 13 cents a share, compared with the same year-ago period. For the fiscal year ended Oct. 31, the firm posted net earnings up 34.2 percent to $37.6 million, or $1.54 a diluted share, on sales of $700.7 million, up 13.8 percent from $615.5 million a year ago. Chairman and chief executive Robert McKnight said in a statement that Quiksilver is on track to hit earnings increases of 20 percent this year. And, its store expansion has paved the way to bigger brand-building.
"One of the factors for its success is the appeal of its image reflecting the California lifestyle," Van Sinderen said. "What you see are kids aspiring to that, whether or not they surf, skate or snowboard."
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