Quiksilver (NYSE: ZQK) will release its quarterly report on Thursday, and after a strong rally earlier in the year, the retailer's shares have given back a lot of the ground they gained. Although analysts expect Quiksilver earnings to come in positive this quarter, the company has lost money in each of the past two quarters, raising questions about its overall profit potential going forward.

Quiksilver operates in a challenging retail space, offering apparel and equipment for surfing, skiing, snowboarding, and other recreational sports. Those areas have become increasingly popular among young shoppers, but a rise in competition has also created big hurdles for Quiksilver to overcome in order to keep its sales and earnings up. Let's take an early look at what's been happening with Quiksilver over the past quarter and what we're likely to see in its report.

Stats on Quiksilver

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$505.02 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Quiksilver earnings come in positive this quarter?
Analysts have toned down their views on Quiksilver earnings in recent months, cutting their July-quarter projections by almost two-thirds and reversing early expectations for a profit for the full fiscal year to a loss. The stock hasn't responded well, falling almost 40% since late May.

Quiksilver's turnaround efforts took a big step backward in early June, when the company reported fiscal second-quarter results that fell well below what investors had hoped to see. The company's adjusted per-share loss quadrupled from year-ago levels on a 7% drop in sales, and even its popular Roxy line suffered a 4% decline. In particular, international sales were weak, with its Europe/Middle East/Africa segment posting especially sharp losses.

Loss of confidence in Quiksilver's future has led to higher financing costs. In July, the company offered about $500 million in senior notes, paying interest rates of 7.875% in order to pay off existing notes paying 6.875%. The paid-off notes were set to mature in 2015, so the new notes buy Quiksilver three to five years longer before it has to worry about refinancing its debt again. Nevertheless, higher interest costs when the company is already losing money aren't ideal.

Back-to-school sales could prove pivotal for Quiksilver, and analysts aren't convinced the company will do well. Last month, one analyst expected weak performance for Quiksilver's back-to-school season, citing substantially discounted merchandise in its channel checks.

Quiksilver rivals have also struggled, suggesting weakness throughout the sector. Last week, Pacific Sunwear (PSUN) gave guidance for an unexpected loss in the current quarter, downgrading its same-store sales projections as well in light of an overall drop in consumer spending among retailers broadly. Zumiez (ZUMZ -3.51%) has investors equally concerned, as the company's same-store sales for July were weaker than analysts had forecast. Industry analysts have noted that back-to-school spending appears targeted toward discount purchases rather than on higher-margin specialty stores like Quiksilver and its rivals.

In the Quiksilver earnings report, look to see if the company can buck trends set by its peers. Given its relatively high profile internationally, Quiksilver's results could give investors a look at the state of the consumer economy globally as well as closer to home.

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