Winter just isn't Quiksilver's
Despite a 14.5% gain in the overall top line, Quicksilver posted a net loss of $0.18 per share, or a $0.12 loss from continuing operations. Contributing to the loss was a 160-basis-point decline in gross margin and a whopping 26% surge in SG&A costs.
After deciding to hit the slopes in 2005, Quicksilver quickly learned that it should stay out of the snow. The acquisition has been nothing but an avalanche of a bad business. Last year, it wrote off more than $166 million of the $320 million purchase price in goodwill and trademark imparment. It's looking to unload this albatross, even if it means selling it to former Quiksilver president Bernard Mariette, who reportedly was responsible for the acquisition.
The latest earnings report does show that sticking to what Quiksilver knows best -- selling clothes, not hard goods -- will let it regain its footing.
Yet I'm questioning whether its latest venture will pan out as planned. Quiksilver is once again abandoning its loyal surf-and-skate crowd with a line of clothes unrelated to that demographic. A story in yesterday's Wall Street Journal quotes management as saying it is targeting 20-something women with clothing that "looks back to the past, to figures like Jackie Onassis."
Uh, excuse me? Focusing on the female shopper is a smart move. Pacific Sunwear
The line will be sold at upscale department store Nordstrom
So it looks to me like Quiksilver will be jumping from the fire into the frying pan. It made the right decision to jettison the skis, but I'm wary about the company's latest decision to once again ignore its core customers. With shares surging today on the latest earnings report, I'd see this as an opportunity to take profits and wait for Quiksilver to take a powder again.
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