Quiksilver Shares Trip on Unexpected Second Quarter Loss

Andrew Klips |

QuicksilverShares of specialty retailer Quicksilver Inc. (ZQK) are down in extended trading on Thursday following a disappointing earnings report that missed Wall Street expectations on both the top and bottom line as gross margins dove on discounted merchandise across the company’s sales channels.

Revenue for the quarter ended April 30 totaled $458.7 million compared to $494.2 million in the year prior quarter.  The company posted a net loss of $32 million, or 19 cents per share, versus a net loss of $5 million, or 3 cents per share, in Q2 2012.  Adjusted net loss, which excludes restructuring charges and other one-time items, was $20 million, or 12 cents per share, compared to $2 million, or 1 cent per share, in the year earlier quarter.

The figures were far worse than Wall Street expectations of a net profit of 4 cents per share on revenue of $505.4 million.

Gross profit for Quicksilver, whose flagship brands are Quicksilver, Roxy and DC, fell 320 basis points from 49.2 percent in last year’s quarter to 46.0 percent.

The DC brand, which was acquired by Quicksilver in 2004 for $87 million, has gained cult-like popularity amongst extreme sports followers thanks in part to sponsorship from popular skateboarder Rob Dyrdek (also known for MTV’s “Fantasy Factor” and “Ridiculousness”) and skate legend Chris Cole.

On a year-over-year basis, gross profit in the Americas fell from $97.71 million to $92.7 million, in the EMEA segment from $109 million to $88 million and  in the APAC segment from $36 million to $31.6 million.

Cost of goods sold and selling, general and administrative costs decreased 1 percent and 2.6 percent, respectively.

“With a reorganized management structure and our new leadership team largely in place, we have begun working toward globalizing key functions and gaining efficiencies to reap the benefits of our size and scale,” said Andy Mooney, president and chief executive of Quiksilver.  

Keeping the faith, Mooney added, “We believe that, over time, our new focus and structure will allow us to significantly improve profitability, working capital efficiency and competitive positioning.”

Taking a somewhat vague approach to guidance, Quicksilver said that Pro-forma adjusted EBITDA for the second half of 2013 is expected to exceed the $91 million in the second half of 2012.

Shares of ZQK have risen about 81 percent in 2013 through Thursday’s closing price of $7.67.  Limited trading action following the earnings report wasn’t as friendly, with shares stumbling more than 6 percent to below $7 per share.

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