Quiksilver, Inc. has doubled its revenues in the last three years, boosted earnings 134% over the same timeframe, and has seen its market cap surge to $1.75 billion from just about $400 million when the company reported year-end earnings three years ago. For the 2004 fiscal year ended October 31, revenues surpassed the billion dollar mark for the first time, growing nearly 30% to $1.27 billion, while the non-Americas business made up more than 50% of the business. The acquisition of DC shoes six months ago contributed roughly 8% of the revenue gain, or approximately $23.5 million, which would still have put ZQK organic revenues at about $1.2 billion for the year.

Revenues for the fourth quarter increased 30.1% to $350.3 million from $269.2 million in the year-ago period. Consolidated net income increased 43.0% to $24.9 million, or 41 cents per diluted share, versus $17.4 million, or 30 cents per diluted share, in Q4 LY.

The Americas saw Q4 sales increase roughly 25.2% to $157.2 million, compared $125.6 million in sales in Q4 2003. Men’s division sales were up 24% to 87.2 million and Women’s sales grew 30% to $64.3 million. For the year, sales in the region rose 25.3% to $616.8 million, making up 48.7% of the global business versus 50.5% of sales in the prior year. Gross margins in the Americas improved 70 basis points to 40.8% of sales, while the region narrowed SG&A expenses 40 basis points to 30.4% of sales.

Resulting operating income increased 39.5% to $63.8 million, or 10.3% of sales versus $45.7 million, or 9.3% of sales in fiscal 2003. Inventories increased 21% to $104.6 million at year-end.

In Europe, fourth quarter sales increased 26.0% when measured in U.S. dollars to $134.4 million, compared to revenues of $106.7 million in the year-ago quarter.

The Men’s business rose 23% to $97.7 million, while the Women’s business increased 34% to $36.6 million. Sales increased 16% when measured in Euros and would have grown 22% in constant dollars. For the year, sales in the region rose 28.5% to $496.3 million, making up 39.2% of the global business, down a bit from 39.6% of the business last year. Gross margins in Europe improved 160 basis points to 50.7% of sales, but SG&A expenses in the region rose 290 basis points to 35.9% of sales. Resulting operating income increased 18.7% to $73.5 million, or 14.8% of sales versus $61.9 million, or 16.0% of sales in fiscal 2003. Inventories in Europe increased 12% when measured in Euros and increased 23% in U.S. dollars, totaling $53.7 million at year-end.

Asia/Pacific revenues increased 53% to $56.1 million in the fourth quarter, compared to $36.7 million in the fourth quarter of 2003. Measured in Australian dollars, Asia/Pacific revenues increased 43% for the period. For the year, sales in the region jumped 57.9% to $$148.7 million, making up 11.7% of the global business, up from 9.7% of the total business last year. Gross margins in Asia/Pacific dipped 70 basis points to 49.2% of sales, while the region increased SG&A expenses 100 basis points to 35.0% of sales. Resulting operating income increased 73.9% to $21.1 million, or 14.2% of sales versus $12.1 million, or 12.9% of sales in fiscal 2003. Asia/Pacific inventories increased 23% in Australian dollars and 31% in U.S. dollars, totaling $21.3 million at year-end
Consolidated inventories increased of 18% after adjusting for the effect of changes in foreign currency translation rates. Consolidated average turnover was 4.6x at year-end, versus about 4.0x last year.

Owned-retail continues to grow, adding 40 shops for the year. The company now operates 167 stores worldwide, with 67 in the Americas, 79 in Europe, and 21 in the Asia/Pacific region. They also count 159 licensed shops that are wholesale accounts and another 91 shops where they earn royalties.

The company sees good upside in the DC Shoes business as it works to consolidate its distributors in Europe and elsewhere much as it did with the Quiksilver businesses. The French business has already been “folded in” and the others will come inside in 2005. Management said the cultural fit has been “fantastic” and they are working closely together on a number of initiatives.

DC is now operating using Quik’s production and warehouse management systems after terminating DC’s third party logistics contract. Quiksilver had assumed the finance and operations functions shortly after acquiring DC. The DC team is now handling the Gnu and Roxy snowboard programs. DC is now assisting with the technical development and sourcing of Quiksilver and Roxy footwear for the Fall ‘05 season while Quiksilver is sourcing/producing DC’s apparel for Fall 2005.