Quiksilver Reduces Outlook for Quarter
In a sign of choppy waters ahead for the surf-wear industry, bellwether Quiksilver Inc. said Thursday that it is lowering its projections for the current quarter and next fiscal year, even as it reported healthy earnings for its May-July quarter.
The gloomy forecast stems from intense competition that is pushing down prices and from the expense of a beefed-up advertising campaign, said Quiksilver, the world’s largest maker of surf apparel.
The Huntington Beach company said it now expects fiscal fourth-quarter earnings of 30 cents to 32 cents a share, down from 42 cents a share in the same quarter last year. Next year, earnings are expected to range from $1.50 to $1.55 a share, well below the $1.85 analysts had forecast, according to a Thomson Financial/First Call survey.
Quiksilver announced its quarterly results and outlook after the close of regular U.S. trading. The stock, which has been slipping all week, closed Thursday at $19.02, down 98 cents, on the New York Stock Exchange.
The company’s scaled-down projections come as surf-wear makers and retailers are immersed in the back-to-school selling season, which for many in the industry is more critical than Christmas. Surf shops along the coast say they have been encouraged by strong sales after one of the worst spring-summer performances in recent memory.
“We’re recovering from a very tough spring and early summer, and that’s the trend across the board,” said Eric John, owner of Laguna Surf & Sport and co-owner of other Orange County surf shops.
The setback this year has been jarring for both small surf shops and larger manufacturers, which have been enjoying bustling sales since the mid-1990s.
The problems began when an overcast spring dampened sales.
“When it got warm later, the business got better, but it didn’t save what was a pretty dismal spring,” said Dick Baker, chief executive of surf-wear maker Ocean Pacific Apparel Corp. in Irvine and president of the Surf Industry Manufacturers Assn. “Back-to-school has been much better.”
Indeed, Quiksilver’s earnings for the three months ended July 31 matched analysts’ expectations, climbing 19.3% to nearly $8 million, or 33 cents a share, from almost $6.7 million, or 29 cents, a year ago. Sales rose 27.3% to almost $155.3 million.
Quiksilver’s steady performance reflected its diverse product line, strong European sales and its hot Roxy brand for girls, analysts say.
But over the last few weeks, it became apparent that the sagging retail market was hurting business, Chief Executive Robert B. McKnight Jr. told analysts in a conference call.
Surf-wear makers say their styles are popular, but sales have been hurt by a saturation of products. As the laid-back Southern California look caught on over the last decade, many large companies--from Abercrombie & Fitch to Old Navy to Target--began pushing their own surf styles, often at lower prices than at beach shops.
