Quiksilver could shed flagging brand
One day after Quiksilver Inc. reported its first quarterly loss in 15 years, investors pushed the surf wear giant’s stock price up 8%.
Investors are encouraged because the Huntington Beach-based company is cutting costs associated with its flagging Rossignol division, analysts said, and even entertaining the possibility of selling the ski-equipment maker that it bought two years ago.
“I think there’s a possibility they’ll get rid of the business that’s been dragging them down,” said Jeff Mintz at Wedbush Morgan Securities Inc. in Los Angeles, after the company held a conference call with analysts Friday. “Their business would have been much better today if they had never bought it in the first place.”
The drag from Rossignol has been pronounced this year because of a miserable snow season. Quiksilver’s Cleveland Golf division also has been struggling while its core apparel and shoe brands, Quiksilver, Roxy and DC, have sold well.
“The Rossignol acquisition, so far, has proven to be a mistake,” said Jeff Van Sinderen at B. Riley & Co. Inc. Although the business may be “salvageable,” the analyst said Quiksilver should try to unload both Rossignol -- at least its hard goods division -- and Cleveland Golf.
“I don’t think they want to be in the hard goods business anymore,” Van Sinderen said. “They’re an apparel company.”
After the stock market closed Thursday, Quiksilver reported a second-quarter loss of $4.8 million, or 4 cents a share, in line with Wall Street’s expectations. It was the company’s first red ink since 1992. A year earlier, the company earned $3.7 million, or 3 cents a share.
Sales rose 17% to $603.8 million.
The company anticipates revenue of about $2.5 billion this year and profit of 53 cents a share.
During Friday’s conference call, Chief Executive Robert B. McKnight Jr. reminded listeners of the strength of the company’s surf and skate brands.
“Our outlook remains positive, and we are very confident in the direction of our business,” McKnight said. He apparently convinced some investors.
By the time the market closed Friday, Quiksilver’s shares had jumped $1.07, or 8%, to $14.33. The stock is still off 9% for the year.
McKnight praised Rossignol as “one of the world’s most powerful, compelling and underutilized brands” and said there was “a huge opportunity” to develop clothing, shoes and other goods under that label.
But he acknowledged the risks that Quiksilver took on with the ski and golf units, which are expected to incur a pretax loss of about $50 million this year and added that the company was considering “all the strategic possibilities.”
“We are looking at every possible alternative concerning the hard goods,” McKnight said. “Everything is on the table.”
