Cost cuts helped Quiksilver Inc. adjust to lagging sales and retailers’ lowered inventories, but its third-quarter profits fell by more than half.
This story first appeared in the September 4, 2009 issue of WWD. Subscribe Today.
In the three months ended July 31, the Huntington Beach, Cailf.-based surfwear and sportswear firm posted net income of $1.3 million, or 1 cent a diluted share. Earnings fell 52.8 percent compared with a year ago, when they totaled $2.9 million, or 2 cents a share.
Excluding one-time items, earnings were 3 cents a share, meeting the average expectations of analysts polled by Yahoo Finance.
Revenues in the quarter fell 11.2 percent to $501.4 million from $564.9 million in 2008.
“Even though our third-quarter performance was in line with expectations, the overall environment remains very challenging,” said Robert McKnight, chairman, president and chief executive officer.
McKnight added that footwear sales, which had been trending better than apparel, had slowed and that competition from lower price points had affected juniors sales, especially the Roxy line aimed at girls. The young men’s business looked to be stabilizing, McKnight said, as it met retailers’ reduced expectations.
By region, revenues in the Americas fell 6 percent in the third quarter to $256.8 million, while Europe was down 19 percent to $189 million and Asia slid 8 percent to $55.1 million. On a constant currency basis, European sales declined 8 percent and Asian sales increased 12 percent.
The firm said it expects fourth-quarter revenues to fall in the midteens and to record a loss per share in the midsingle-digit range in the fourth quarter.
Quiksilver has spent much of the calendar year focused on cost controls. In January, the company said it planned to cut 200 jobs in the Americas division. In the third quarter, it trimmed selling, general and administrative expenses by 8.8 percent to $211.8 million.
The firm has also sought to better its balance sheet in the year. In June, Quiksilver agreed to a five-year secured term loan of about $150 million from private equity group Rhône and refinanced its credit facility with a three-year, $200 million asset-based line with Bank of America and GE Capital serving as lead arrangers.
Before the earnings announcement, shares of the company closed at $2.86, up 36 cents, or 14.4 percent.
In the first nine months of fiscal 2009, Quiksilver posted a net loss of $190.3 million, or $1.49 a share, versus a loss of $225.3 million, or $1.80 a share, a year ago. The deficits include losses from discontinued operations of $132.8 million and $304.7 million, respectively, principally from its now divested Rossignol operations.
Sales in the three quarters fell 13.2 percent to $1.44 billion from $1.66 billion in 2008.