Big Changes for Quiksilver, Dude

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It was an odd pairing anyway -- think Jeff Spicoli marrying Picabo Street -- but the decision by skate-and-surf retailer Quiksilver (NYSE: ZQK) to hang up its Rossignol ski division is a welcome move. The hard-goods division has been weighing down Quiksilver's performance ever since the seller of DC and Roxy brands bought it.

Perhaps not as welcome is President Bernard Mariette's decision to resign and "pursue other interests," like potentially acquiring and running Rossignol. Investors have to hope that Quiksilver doesn't allow Mariette to acquire the ski company on the cheap.

The retailer is paying Mariette a princely amount in severance as he walks out the door, plus a guaranteed consulting contract if Quiksilver ever decides to pick up the phone and call him for advice. Otherwise, Mariette doesn't have to do a thing to make $2.9 million for the next year. Perhaps he could use that money to pay for Rossignol.

Quiksilver's acquisition of Rossignol seemed little more than a sop to help out Mariette family friend Laurent Boix-Vives, who at the time had a controlling 43% interest in the ski maker -- and 63% of the voting rights. The $320 million deal also gave Quiksilver $160 million in Rossignol's debt and a stake in golf outfitter Cleveland Golf.

The deal also occurred just as Rossignol was losing market share to rivals such as K2 (which Jarden (NYSE: JAH) acquired) and golf mania was subsiding. With the warm weather across Europe and the Americas last year, Rossignol suffered a 22% drop in winter-sports equipment brand revenues. And it also caused Quiksilver to have to write down $157 million in goodwill impairment related to the ski maker. So Rossignol has been a losing proposition that caused Quiksilver to fall out of compliance with certain loan covenants related to Rossignol, and Quiksilver was forced to obtain a waiver from the bank.

Despite the talk of all of the cross-branding opportunities the deal represented, the only real attractiveness Rossignol offered was the chance to splash the ski maker's name across sundry T-shirts and sweatshirts. Fortunately, if Quiksilver can sell the division -- to outsiders or to Mariette -- the branding opportunity will remain.

Quiksilver has signed up JPMorgan Chase (NYSE: JPM) to shop Rossignol, and it was able to unload the golf division for $133 million to Japanese sporting-goods retailer SRI Sports in December. Although Quiksilver may have climbed into the red last year, selling off unprofitable segments like Rossignol will not only bring in cash but also help Quiksilver's struggling business.

Snow-related weakness is not confined to Quiksilver. We've also seen related weather weakness at Zumiez (Nasdaq: ZUMZ) and Pacific Sunwear (Nasdaq: PSUN), too. So let's see whether Quiksilver can successfully retire Mariette and Rossignol while returning value to its shareholders and maybe getting a leg up on the competition.

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