The release of X-Men: Days of Future Past has made fictional character Quicksilver a hit right now, but the surf-wear seller Quicksilver, Inc. ($ZQK) got wiped out on Tuesday following the company’s Q2 2014 financial report. The shares of Quicksilver had plummeted 41.11 percent to $3.41 a share by market close.
Worst Day for Quicksilver Stock Since IPO
Founded in 1970, the Huntington Beach, Cali-based company designs, develops, markets, and distributes branded apparel, footwear, and accessories for men, women, and children. However, Tuesday marked the biggest intraday decline since the company’s initial public offering in 1986.
According to the company’s earnings report on Monday, it had a 10.52 percent year-over-year decline in revenue to $408 million versus $456 million from the same period in 2013. Additionally, Quicksilver’s net loss from continuing operations jumped to $46 million, or $0.27 per share, from $33 million, or $0.20 per share a year earlier.
But the company still expects some continued year-over-year gross margin improvements in the second half of fiscal 2014. Andy Mooney, President and CEO of Quicksilver, also stated his belief in their plans for greater profit.
“During the second quarter, we again reduced our expense structure, increased sales in our direct to consumer channels and emerging markets, and drove improvements in gross margins,” he said. “These improvements were offset by decreased net revenues in our wholesale channel, especially in the developed markets in North America and Europe. Consequently, pro-forma adjusted EBITDA decreased versus the prior year.”
Slumping Wholesale Revenue to Blame
The company is also working to rekindle its brands’ popularity. With plans to cut costs and expand its athletic product collaborations, Quicksilver is trying to consolidate vendors and streamline the number of products it sells.
However, the problem is that Quicksilver deeply relies on its crumbling wholesale channels, from where 70 percent of the company’s sales come. In the past 12 months, 20 percent of the company’s smaller U.S. wholesale accounts closed. Wholesales revenue decreased 15 percent during the second quarter to $286 million. Retail revenues were flat at $90 million. Same-store sales in company-owned retail stores increased 1 percent. Company-owned retail stores increased 4 percent totaled $658 million at second quarter of fiscal 2014, compared to the same period of 2013. E-commerce revenues, meanwhile, grew 23 percent to $30 million. But even though revenues from retailers, company-owned stores, and e-commerce increased, they weren’t large enough to offset the total loss.
Quicksilver’s stock has underperformed the Standard & Poor’s 500 Index, declining 22.06 percent from its price level of one year ago. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, Quicksilver’s return on equity has plunged 41.40 percent to -0.62, which significantly trails that of both the industry average and the S&P 500. In addition, the debt-to-equity ratio is as high as 2.35, implying increased risk associated with the management of debt levels within the company.