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Tiffany Montgomery
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Quiksilver meets guidance, closing some stores - plus a note about ASR

By Tiffany Montgomery
December 18, 2008 4:50 PM

More details from the Quiksilver earnings conference call today and a note about ASR.

ASR: Before the conference call, a Quiksilver executive told me the company decided not to go to ASR in January as a cost saving measure. He said the company believes in ASR and its mission, but given the current climate, is evaluating every expense. Quiksilver decided it would use other, more cost-effective means to meet with its customers including continuing the regular meetings between sales reps, executives and retailers that happen frequently. He also said Quiksilver will revisit its decision and evaluate conditions when the time comes to see if the company will attend the September show.

Conference call: Given that the current environment is "worse than anyone expected," Quiksilver CEO Bob McKnight said he was pleased the company met the financial guidance it gave in June.

Spring orders: Bob said the spring order book is strong, but will depend on how the holiday season plays out at retail.

Brand performance: DC logged double digit increases, the Roxy business is struggling - fitting with the challenging juniors market in general, and Quiksilver is "pretty stable" and "holding its own" with growth in the low single digits.

Liquidity and debt: Quiksilver said banks were more willing to work with the company now that it has sold the risky hardgoods ski business. The company said during the call it has $215 million of available liquidity and $1.07 billion in debt. Quiksilver is currently working with its bankers in Europe and Australia to refinance its short-term debt, and is also negotiating another term loan to supplement its credit availability in the U.S.

The company believes these moves will help its short-term financial situation, but is still interested in raising money by exploring longer term strategic options, including attracting private equity investors.

The company is also looking to generate cash with improved receivables, inventory efficiencies and expense reduction.

The company has cut its capital expenditure budget to $60 million in 2009 from $94 million in 2008.

Rossignol sale: Bob McKnight said the sale of Rossignol has eliminated a distraction and is helping employee morale move in the right direction. He said he is proud of the "determination and fight" Quiksilver employees have shown in the tough economic climate.

Retail: The company wants to close 25 underperforming stores, including 21 in the U.S. Nine of the underperforming stores will close in fiscal 2009, and Quiksilver will work to close the rest as soon as possible.

Canada: Canada was a bright spot in both retail and wholesale.



Q4 revenues: rose 3 percent to $606.9 million

FY revenues: up 11 percent to $2.2 billion


Q4 loss from continuing operations: $13.8 million (including a $55 million goodwill charge) vs. $43.9 million the same period last year.

Q4 net income from continuing operations, excluding the charge: $41.6 million

FY net income from continuing operations (including $55.5 million charge): $65.5 million vs. $116.7 million in 2007.

FY net income from continuing operations, excluding the charge: $120.9 million

Regional revenue breakdown


Q4 Americas revenues: rose 10 percent to $306.9 million

FY Americas revenues: rose 7 percent to $1.1 billion

Americas notes: Most revenue growth came from DC and timing of shipments. Retail revenues also grew, mainly from new stores. Retail comps were modestly negative.


Q4 European revenues: down 4 percent to $216.3 million (down 6 percent in local currency)

FY European revenues: up 16 percent to $933.1 million (up 4 percent in local currency)

Europe notes: Bob said the European business performed very well and delivered 100 million Euros of operating profit.

Asia Pacific

Q4 Asia Pacific revenues: up 2 percent to $82.6 million (up 10 percent in local currency)

FY Asia Pacific revenues: up 9 percent to $265.1 million (up 3 percent in local currency)

Asia Pacific notes: Japan was a bright spot.

Inventories: up 5 percent at the end of the quarter to $312.1 million


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