Quiksilver’s Earnings Hurt by Acquisition

Surf wear maker Quiksilver Inc. said its profit fell 89% in its fiscal second quarter, reflecting its purchase last July of ski equipment manufacturer Rossignol, a seasonal business that falls off at midyear.

The Huntington Beach company also announced that it had opened new headquarters for Rossignol in Park City, Utah. It will be known as Mountain Center.

In a conference call with analysts, Chief Executive Robert B. McKnight Jr. gave his assurance that the integration of Rossignol and Cleveland Golf was proceeding smoothly and that the two divisions were “running ahead of plan.”

He also said profit and sales expectations were unchanged for the rest of the year.

“We have a lot of momentum and we are very passionate about capitalizing on it,” he said.

For the quarter ended April 30, profit was $3.7 million, or 3 cents a share, compared with $34.7 million, or 28 cents a share, a year earlier. The results were in line with analysts’ expectations.

Sales rose 21% to $516.9 million from $426.9 million.

Management also soothed analysts’ concerns about the important fourth quarter, saying it still expects profit in that period to be 54 cents to 55 cents, more than twice what it earned a year earlier.

For the year, the company still expects earnings of 76 cents to 77 cents a share.

Jeff Mintz, an analyst with Wedbush Morgan, said he was glad to hear that plans to launch a line of Rossignol apparel next year remain on track.

Management said its core business was healthy despite challenges in the Asia-Pacific region due to a weak retail environment, particularly in Australia.

The Roxy brand for girls and the DC shoe division are growing rapidly and offer increasing opportunities as Quiksilver sharpens its focus on winter sports.

For example, Quiksilver began selling Roxy skis in 2005 and orders have more than doubled this year.

“I think that business is going to be very good,” Mintz said. “It was very good last year and it was literally something they did at the last minute.”

Rossignol has a negative effect on the business in the second and third quarters, when shipments are slow, and a positive effect on the first and fourth quarters, when it generates profit, the company said.

Since the purchase, Quiksilver has been streamlining that business, shrinking the number of European distribution centers to three from 17 and cutting 300-plus jobs, or more than 10% of the workforce.

Quiksilver opened 20 new stores in the quarter, including flagship locations in London and Tokyo, and a DC store in New York’s Soho district.

Shares of Quiksilver, which have fallen 13% this year, fell 16 cents Thursday to $12. The earnings were announced after the market closed.