Quiksilver Reduces for 2nd Time Its Earnings Outlook

Blaming late deliveries from suppliers, surfing apparel giant Quiksilver Inc. Monday lowered its fourth-quarter earnings prediction for a second time and said it will probably come close to breaking even.

The revised forecast from Quiksilver Chairman Robert McKnight was anticipated by analysts, who said they are not surprised because the apparel industry remains mired in recession and Christmas sales will likely be lousy this year.

Quiksilver shares dropped 50 cents each Monday to close at $9.75 on the National Assn. of Securities Dealers Automated Quotation (NASDAQ) system.

McKnight, in an interview, blamed the stock loss on his announcement and added: “We thought it would be worse. The market is very fragile right now. We don’t want to make this announcement more than the next guy, but we have to run our business as a long-term venture.”

He predicted in September that earnings for the company’s fourth quarter, which ends Thursday, would fall by as much 60% below the $1.9 million in last year’s fourth quarter.

McKnight said the company will experience a slight loss or modest gain for the quarter, but nothing close to his earlier prediction of net income of $760,000 to $1.14 million. “The bell hasn’t rung and the numbers aren’t in,” he said, adding that the announcement was simply intended “to let everyone know it will be worse than (the previous prediction).”

But he said that the announcement is timely because retailers expected their holiday inventory shipped by Oct. 25 and that Quiksilver’s suppliers had been unable to meet the deadline. Like most surf wear firms in Orange County, Quiksilver designs and sells its apparel but contracts out its manufacture.

Orders have been strong, he said, but more stores have been ordering later--and in smaller lots--so they can closely manage their inventories as they cope with recession. Those late orders have slowed production.

“Retailers are buying later and closer to the window,” he said.

The company has also reduced its fourth-quarter sales forecast and said it now expects revenue equal to or slightly below last year’s $18.6 million.

The company also said it would pay $322,000 to settle a lawsuit filed by a group of disgruntled shareholders last January. The proposed settlement, which expressly denies any liability on the part of the company or its executives, amounts to “basically just legal fees” and will not invite similar suits in the future, McKnight said.

The lawsuit alleged that the company’s officers “knowingly and recklessly” misled investors about Quiksilver’s financial health.

Miriam W. Meglan, an analyst for the brokerage of Johnson, Rice & Co. in New Orleans, said Quiksilver’s announcement is in keeping with the sullen retail climate. She said she believes that the company’s management is doing the best it can in a recession.

John S. McCartney, who tracks apparel for the brokerage of Branch, Cabell & Co. in Richmond, Va., said “nothing is fundamentally wrong with Quiksilver; it’s just the environment.”