I suppose meeting your earnings target is worthy of praise. However, don't expect me to pat surf-apparel specialist Quiksilver
The company earned $0.02 a share, excluding a charge of $0.08 for a pending acquisition of the rest of Roger Cleveland Golf Company, which it began to acquire in 2005. However, that earnings figure is still is a 50% drop from a year ago. Surfers were still shopping at Quiksilver -- sales grew 17% -- but the boost in revenue didn't flow to the bottom line. Gross margins contracted 1.4%, partially from a rise in manufacturing costs at Rossignol, which Quiksilver also owns. The company took on more debt, too, and that's not a wave you'll want to chase.
Despite the troublesome numbers, management reiterated its full-year guidance of $0.53 a share. At least one analyst has expressed skepticism, given the need to improve gross margins, and I have to agree.
The company announced plans to develop a new women's line, aimed at 18- to 24-year-olds. While the line may prove to be a growth vehicle, it won't be ready for another year. And although the company says it will be "designed for the edgy, independent young woman," that to me means dealing with a fickle fashion-oriented group. In other words, the whole thing could be hit-or-miss, or at least run hot or cold, depending on whether the designs are a hit with the "in" crowd.
Of course all retailers, including American Eagle
Declining earnings, a compressed gross margin, and a higher debt load all add up. Throw in a trailing price-to-earnings ratio of 24, and I'd choose a to surf a different beach.
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