Quiksilver, Inc. reported strong sales growth in its softgoods businesses that was more than enough to offset declines in the Rossignol business it is in the process of trying to divest. The company said it is seeing interest in the business and feels it has done a lot of work to make it attractive to possible suitors, but no deal is yet imminent.

Bob McKnight, newly re-minted company president, commented on a conference call with analysts that the company’s other brands are seeing success at retail. “On the DC brand, the growth is coming through greater penetration with the footwear business in footwear specialty stores in the core market and the department store channel; and, tremendous rates of growth in the apparel and accessory business across all the channels with the special focus on new growth with department stores there,” said McKnight.


McKnight said the Quiksilver and Roxy businesses were very strong in swim, board shorts, walk shorts, T-shirts and sandals.


Finally, McKnight commented that in the company’s owned-retail business, “the trends in February were much improved over what happened in November, December, January.  And while February is not a gigantic month, the trends are positive relative to where they were, and we are very anxious to see how business shakes out here in March and April.”


In November 2007, the company reorganized its operating segments to include a separate Wintersports equipment segment. Americas, Europe and Asia/Pacific segments include the apparel operations by geographic region and the Wintersports equipment segment includes world-wide equipment operations.


The company’s global apparel revenues increased 19% to $500.5 million from $421.5 million a year ago with approximately $27.7 million of the increase attributed to the effects of foreign currency rates.


Within in this total, net revenues in the Americas segment increased 18.0% during the first quarter of fiscal 2008 to $232.9 million from $197.4 million in the first quarter of fiscal 2007. Gross margins in the Americas increased 70 basis points to 43.2% from 42.5%, but were more than offset by a 310 point jump in SG&A expenses to 40.6% of sales from 37.5% for the year-ago quarter. As a result, operating income for the region declined 37.8% to $6.2 million from $9.9 million for the same period last year.


European segment net revenues increased 19.3% during the first quarter of fiscal 2008 to $205.3 million from $172.0 million in the first quarter of fiscal 2007. Approximately $21.4 million, or 12.4 percentage points, of Europe’s increase was attributable to the positive effect of foreign currency exchange rates. Gross margins in Europe improved 60 basis points to 53.8% of regional net sales, but as in the Americas, SG&A expenses rose.  Europe SG&A increased 400 basis points to 44.8% of sales, which caused a 14.0% decline in regional operating income to $18.4 million from $21.4 million for the year-ago period.


Asia/Pacific proved to be one of the strongest regions for Quik, led by growth in both Australia and Japan. Segment net revenues increased 19.2% to $61.3 million in the first quarter of fiscal 2008 from $51.4 million in the first quarter of fiscal 2007.  Approximately $6.3 million, or 12.2%, of Asia/Pacific’s increase was attributable to the positive effect of foreign currency exchange rates.  Gross margins for the region jumped 470 basis points, while SG&A expenses declined 40 basis points to 45.9% of sales.


Asia/Pacific was the only region to post an operating income increase, jumping to $3.5 million from $0.3 million last year.


The bulk of Quik’s problems for the first quarter came from the newly separated Wintersports equipment segment where net revenues decreased 2.1% to $104.8 million from $107.1 million last year.  Without a $10.2 million benefit from currency-exchange rates, Wintersports sales would have decreased 11.7% for the quarter. Gross margins dropped 1,450 basis points to 31.3% of sales, while SG&A expenses jumped 1,310 points to 51.6% of sales. The segment posted an operating loss of $21.4 million after an operating profit of $7.7 million last year.


ZQK felt consensus estimates of EPS of 58 cents and annual sales of $2.6 billion  should be achievable. In the apparel and footwear segments, assumptions are for a 10% revenue growth from $2.08 billion to $2.29 billion and operating income of around $224 million for the year. The Quiksilver brand, which did a little over $850 million in fiscal 2007, should grow in the high-singles, with Roxy, which did about $750 million, up in the 8% to 12% range. DC, which generated $350 million in sales last year, should grow in excess of 20%. In the equipment segment, the company sees revenue of $385 million, up about 10% with an operating loss of around $41 million.