MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.
Details on Industry Insight.
Editor's note: For much more detail, see our Executive Edition story from the earnings conference call with executives that includes a breakdown of performance by brand, future orders by brand, retail comps for Americas, retail plans for Europe, much more.
Quiksilver, Inc. Reports Fiscal 2011 Second Quarter Financial Results
• Revenues of $478 million grew 2% compared to Q2 last year
• Gross Profit of $262 million grew 5% compared to Q2 last year
• Gross Margin expanded 160 bps to a Q2 record 54.8% of revenues
• Pro-forma Adjusted EBITDA of $62 million was ahead of plan
Net Debt at April 30 reduced 19% from a year ago to $594 million
HUNTINGTON BEACH, Calif.--(BUSINESS WIRE)-- Quiksilver, Inc. (NYSE:ZQK - News) today announced operating results for the second fiscal quarter ended April 30, 2011. Revenues grew 2% to $478.1 million as compared to $468.3 million in the second quarter of fiscal 2010. Consolidated gross profit of $262.2 million increased 5% compared to the second quarter of fiscal 2010 as gross margin expanded 160 basis points to a second quarter record of 54.8% of revenues.
Pro-forma Adjusted EBITDA of $62.1 million was higher than the company’s expectations and was roughly the same as a year ago. Pro-forma income from continuing operations was $17.3 million, or $0.09 per share, compared to $15.7 million in the second quarter of fiscal 2010. Pro-forma income for the second quarter of fiscal 2011 primarily excludes a $74.1 million non-cash goodwill impairment charge and valuation allowances provided against tax assets totaling $26.0 million related to the Asia Pacific region. Including the impairment charges and valuation allowances, the loss was $83.3 million, or $0.51 per share, compared to income from continuing operations of $8.8 million, or $0.06 per share, for the second quarter of fiscal 2010. A reconciliation of GAAP results to pro-forma results is provided in the accompanying tables.
Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “We are pleased with our operating results for the quarter, and in particular with our return to overall revenue growth and our record gross margins. Our Americas and European businesses delivered strong performances, although our business in Asia Pacific was affected by the natural disasters occurring in several of our markets. While global markets remain uneven, we are seeing some really encouraging signs for the future. For example, this was our second consecutive quarter of strong double digit comp store sales in the U.S., and, for the first time in a while, we are seeing growth in our fall/winter order books for Roxy, which remains the world’s largest and most respected girls action sports brand. So the initiatives we’ve set into motion are gaining traction and we remain on track to successfully transition to stronger growth in the future.”
Net revenues in the Americas increased 5% during the second quarter of fiscal 2011 to $210.7 million from $199.7 million in the second quarter of fiscal 2010. As measured in U.S. dollars and reported in the financial statements, European net revenues decreased 1% during the second quarter of fiscal 2011 to $206.9 million from $208.7 million in the second quarter of fiscal 2010. In constant currency, European segment net revenues decreased 4% compared to the prior year. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues decreased 1% during the second quarter of fiscal 2011 to $58.1 million from $58.6 million in the second quarter of fiscal 2010. In constant currency, Asia/Pacific segment net revenues decreased 12% compared to the prior year. Please refer to the accompanying tables in order to better understand the impact of foreign currency exchange rates on revenue trends in the European and Asia/Pacific segments.
The company reduced its net debt by 19% to $594 million compared to $733 million a year ago.
Q2 Brand Highlights
• Quiksilver announced the re-signing of 25-year-old surfer Dane Reynolds to a 6-year deal to continue riding for the Quiksilver surf team and to contribute to the design and development of a new signature line of products. Dane is thought by many to be the most influential surfer in the world today.
• Quiksilver also announced the re-signing of 23-year old French surfer Jeremy Flores to a new endorsement contract. Sponsored by Quiksilver since the age of 9, Jeremy was the youngest surfer ever to qualify for the ASP (Association of Surfing Professionals) World Tour in 2007. In December, Jeremy became the first European surfer to win the prestigious Pipe Masters contest in Hawaii, which helped him to finish 9th in the ASP World Tour rankings last year.
• Australian Roxy surfer Sally Fitzgibbons has won two of the first five events in the 2011 ASP Women’s World Tour and is currently ranked #2 in the world. Sally’s next opportunity to improve upon her current standing will be in July at the Roxy Pro in Biarritz, France.
• The Street League DC Pro Tour had a very successful kick-off in Seattle to its second season of skateboarding competitions. The finals were carried live on ESPN and the next event is slated for June 11-12 in Kansas City.
Quiksilver, Inc. (NYSE:ZQK - News) is the world’s leading outdoor sports lifestyle company, which designs, produces and distributes a diversified mix of branded apparel, footwear, accessories, snowboards and related products. The company’s apparel and footwear brands represent a casual lifestyle for young-minded people that connect with its boardriding culture and heritage.
The reputation of Quiksilver’s brands is based on outdoor action sports. The company’s Quiksilver, Roxy, DC, Lib Tech and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding.
The company’s products are sold in over 90 countries in a wide range of distribution, including surf shops, skate shops, snow shops, its proprietary Boardriders Club shops and other company-owned retail stores, other specialty stores and select department stores. Quiksilver’s corporate and Americas’ headquarters are in Huntington Beach, California, while its European headquarters are in St. Jean de Luz, France, and its Asia/Pacific headquarters are in Torquay, Australia.