Saying that its reorganized management structure is in place and that it is making progress in its turnaround plan, Quiksilver still has much work in front of it as it reported a loss of $32,385,000 for the second quatter ended Apr.30 this year against a loss of $5,120,000 last year, Revenues were down 5% to $458,748,000 from %492,213,000, including an increase in Americas sales to $229 million, a 16% dip in EMEA to $165 million from $196 million and a 14% decline in Asia/Pacific to $64 million from $74 million. This year's results included impairment charges of $5.3 million against $400,000 last year.
The second quarter saw gross margin drop 20 b.p., about half of that as a result of clearance at the DC brand that is expected to continue. The rest was evenly split between cancelled wholssale orders in EMEA as a result of taking an extra week to implement an SAP conversion and the rest from inventory reserces taken against doscontinued, overlapping lines like the Quiksilver women's business. SG&A was down as the company continues to pare costs with fewer athletes and events, head count reductions and pruning of unproductive stores. These efforts are exoected to continue and provide half of the forecasr $150 million EBUTDA improvement in ZQL's turnaround plan. The rest will come from supply chain optimization efforts such as SKU reductions, factory consolidation and more centralized procurement procedures.
Form a brand perspective, ZQK seemed most positve about Roxy, whose wholesale growth in the Americas driver behind that region's top line improvement. Going forward, it sees Roxy growing through channel expansion into sporting goods with women's fitness, running and volleyball being possible activities. The DC brand is also seen as having channel expansion opportinity into athletic specialty. Neither brand will look for more mid-tier business. Quiksilver has less runway here, ZQK concedes, but it still believes it can grow in developed markets as core surf retaulers consolidate their brand structure around bigger players whis control space and provide strong market actibation. Too, it believes the brand can grow in the BRIC markets.
Written by Nicolas Yang
