Quiksilver, Inc. reported that revenues grew 2 percent to $512.4 million in the third quarter ended July 31, 2012, which translated to $38 million, or 8 percent in currency-neutral (c-n) terms.

Revenues increased (in constant currency) across all three brands, all three regions, and fall three distribution channels compared with the third quarter of fiscal 2011. Revenue increased 10 percent to $286.1 million in the Americas from $260.2 million, and was up 12 percent in constant currency. In Europe, revenue decreased 13 percent to $154.1 million from $176.4 million, and was up modestly in constant currency. In Asia Pacific, revenue increased 9 percent to $71.6 million from $65.5 million, and was up 13 percent in constant currency.
Strong revenue growth continued in the company's emerging markets, including Brazil, Russia and Indonesia.
Sales by Brands  (c-n) were:
  • Quiksilver was up 3.5 percent to $193.5 million; 
  • Roxy increased 4.6 percent to $131.8 million; and, 
  • DC was up 15.5 percent to $168.2 million.

Sales by distribution channels (c-n) were:

  • Wholesale business was up 4.5 percent to $370.0 million; 
  • Retail was up 6.8 percent to $119.3 million. Third quarter same store sales in company-owned retail stores grew 4.0 percent on a global basis; and, 
  • E-commerce was up 180.2 percent to $23.2 million.

“During the quarter, we continued to make solid progress on our three long-term initiatives, which are strengthening our brands, expanding our business and driving operational efficiencies throughout the business,” said Robert B. McKnight, Jr., chairman of the board, CEO and president of Quiksilver, Inc. “From a brand perspective, we launched integrated social media marketing campaigns, hosted the premier skate tour in the industry and had outstanding team-rider success in surfing. From a growth standpoint, our business performed admirably.

“DC posted sales growth of 16 percent and e-commerce sales more than doubled. European sales grew modestly, which positions us well compared with our peers,” McKnight continued. “In the area of operational efficiencies, we made tough decisions during the quarter regarding SG&A, including effecting staff eliminations in all our regions, as well as reductions in other operating expenses. Also, after implementing our new ERP system in the Americas in the second quarter, we kicked off our European ERP rollout in the third quarter, which will drive efficiencies by helping to integrate our operations and standardize our business processes globally.”
Gross margin was 49.5 percent of net revenues compared with 50.7 percent in the prior year period, primarily driven by lower gross margins in Europe due to higher levels of discounting and unfavorable currency exchange rate comparisons.
SG&A increased to $225.8 million compared with $221.2 million, up 10 basis points as a percentage of sales, primarily driven by $3.9 million of costs associated with staff eliminations and restructuring.
Pro-forma Adjusted EBITDA was $51.2 million compared with $52.7 million, with the decline largely driven by the contraction in gross margin mentioned above.
Net income was $12.6 million, or $0.07 per diluted share, compared with net income of $10.4 million, or $0.06 per diluted share.
Pro-forma income, which excludes $3.8 million of net after-tax restructuring charges and asset impairments, was $16.4 million, or $0.09 per diluted share, compared with pro-forma income of $10.4 million, or $0.06 per diluted share.

QUIKSILVER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Nine months ended
In thousands, except per share amounts July 31, July 31,
2012 2011 2012 2011
Revenues, net $ 512,439 $ 503,317 $ 1,454,273 $ 1,407,860
Cost of goods sold 258,951 248,199 730,686 667,103
Gross profit 253,488 255,118 723,587 740,757
Selling, general and administrative expense 225,788 221,172 680,213 648,356
Asset impairments 141 – 556 74,610
Operating income 27,559 33,946 42,818 17,791
Interest expense 14,834 15,663 45,464 59,727
Foreign currency gain (2,242 ) (1,456 ) (4,701 ) (5,886 )
Income (loss) before provision for income taxes 14,967 19,739 2,055 (36,050 )
Provision for income taxes 2,508 8,996 14,913 49,937
Net income (loss) 12,459 10,743 (12,858 ) (85,987 )
Less: net loss (income) attributable to non-controlling interest 151 (306 ) (2,257 ) (3,169 )
Net income (loss) attributable to Quiksilver, Inc. $ 12,610 $ 10,437 $ (15,115 ) $ (89,156 )
Net income (loss) per share attributable to Quiksilver, Inc.:
Basic $ 0.08 $ 0.06 $ (0.09 ) $ (0.55 )
Diluted $ 0.07 $ 0.06 $ (0.09 ) $ (0.55 )