Quiksilver Inc., which filed for bankruptcy protection September 9, reduced its losses by 43.5 percent in the third quarter ended July 31 despite an 11.1 percent decline in revenue that was skewed by foreign currency impacts.

Adjusted sales, excluding the impacts of foreign currency exchange rates and discontinued operations, declined just 2 percent in the Americas and increased 14 percent in EMEA and 11 percent in APAC. In emerging markets, which include Brazil, Mexico, Russia, Indonesia, South Korea, China, and Taiwan, aggregate net revenues increased 5 percent (30 percent c-n), reflecting the significant adverse impact of the strengthening U.S. dollar on local currency results. The company's three flagship brands Quiksilver, Roxy, and DEC also posted positive growth on an adjusted basis.

Revenues fell $42.1 million, or 11.1 percent, to $336.1 million during the period, according to a 10-Q filed by the company September 15. ZQK lost $124.7 million during the quarter, down from the $220.6 million lost in the third quarter of fiscal 2014.

The company, which did not hold its customary quarterly earnings call with analysts, received bankruptcy court approval September 10 to reject leases at 27 stores slated for closure.

Brazil Weighs On Americas Segment
Net revenues in its Americas segment decreased $29 million, or 15 percent, during the quarter, including a negative $7 million impact from foreign currency exchange rates. In addition, revenues from licensing of peripheral product categories declined $21 million. Adjusted net revenues decreased by $3 million, or 2 percent, primarily due to a decrease in footwear category net revenues in the Americas wholesale channel. Net revenues in the emerging market of Mexico increased by 20 percent, or 44 percent in currency-neutral (c-n) terms, while net revenues in Brazil dropped 34 percent (9 percent c-n) reflecting the country's slowing economy and logistics issues. Most economists are forecasting Brazil's gross domestic product will drop about 1 percent this year.

Net revenues in the Americas retail channel decreased 4 percent due to negative growth in same-store sales and stores net closures. Net e-commerce revenues decreased 5 percent on an adjusted basis, as reduced discounting resulted in lower revenues but improved gross margins.

In EMEA, Russia Provides An Unlikely Boost
Net revenues in its EMEA segment decreased $11 million, or 9 percent, compared with a year earlier, including a $25 million negative impact from foreign currency exchange rates.

On an adjusted basis, net revenues increased by $14 million, or 14 percent, primarily due to an increase in Quiksilver apparel and accessories net revenues of $6 million in the EMEA wholesale channel. Despite significant adverse impact of a weaker ruble, net revenues in Russia increased 18 percent (85 percent c-n) mainly due to better performance in the wholesale business. On an adjusted bases, net revenues increased 41 percent in the e-commerce channel and 17 percent in the wholesale channel.

Retail Expansion Fuels APAC Growth
Net revenues in the APAC segment decreased by $3 million, or 5 percent, including a negative $9 million impact from foreign currency exchange rates.

Net revenues on an adjusted basis increased by $6 million, or 11 percent, primarily due to net new store openings in the retail channel and a 41 percent increase in e-commerce channel net revenues. Net revenues in the emerging markets of China, South Korea, Taiwan, and Indonesia increased by a combined 18 percent (28 percent c-n). Quiksilver Posts Strong Adjusted Sales GrowthQuiksilver brand net revenues decreased $9 million, or 6 percent, including a $17 million hit from currency exchange rates and a $5 million decline in licensing revenues. Net revenues on an adjusted basis increased by $13 million, or 11 percent, primarily due to increased net revenues in the EMEA wholesale channel.

Roxy brand net revenues decreased $21 million, or 18 percent, with an $11 million hit from currencies and an $8 million decline in licensing revenue. Net revenues on an adjusted basis decreased $4 million, or 4 percent, primarily due to decreased footwear net revenues in the Americas wholesale channel. DC brand net revenues decreased $12 million, or 11 percent, with an $11 million hit from currencies and a $7 million decline in licensing revenues. Net revenues on an adjusted basis increased $6 million, or 7 percent, primarily due to higher footwear net revenues in the APAC wholesale channel.

Wholesale And Retail Post Currency-Neutral Gains
Wholesale net revenues decreased $35 million, or 15 percent, with a $24 million currency impact and $21 million decline in licensing revenue. On an adjusted basis, wholesale net revenues increased $10 million, or 5 percent, compared to the prior year period, primarily due to wholesale net revenue increases in the Quiksilver brand. Retail net revenues decreased $11 million, or 9 percent.

Changes in foreign currency exchange rates contributed $15 million of this decrease. On an adjusted basis, retail net revenues increased $4 million, or 4 percent, versus the prior year. Global retail same-store sales were down 1.8 percent in the third quarter of fiscal 2015, which was more than offset by 52 net new store openings during the previous twelve months. E-commerce net revenues increased $1 million, or 5 percent, despite a $2 million hit from foreign currency exchange rates, thanks to growth in the EMEA and APAC segments where the company expanded its online service area.

Gross profits inch up
Gross margin inched up 10 basis points to 48.0 percent, primarily due to lower discounting in the wholesale and retail channels of all three regional segments (approximately 65 basis points) and a channel mix trend in favor of its higher margin direct-to-consumer channels (approximately 93 basis points), offset by the negative impact of the foreign exchange variation on the cost of goods sold (approximately 190 basis points).

SG&A from continuing operations decreased $39 million, or 19 percent, to 49.4 percent of revenue, compared with 54.3 percent a year earlier. Changes in foreign currency exchange rates accounted for approximately $22 million of this decrease, while the remaining $17 million decrease was primarily attributable to reduced employee compensation expenses.

Impairment Charges Drop 45 Percent
Goodwill impairment charges were $80 million and $178 million in the third quarter of fiscal 2015 and 2014, respectively. In the third quarter of fiscal 2015, goodwill impairment charges of $74 million and $6 million were recorded in its Americas and APAC reporting units, respectively. In the third quarter of fiscal 2014, a goodwill impairment charge of $178 million was recorded in its EMEA reporting unit.

Asset impairment charges were $17 million, up sharply from $200,000 in the third quarter of fiscal 2014. The vast majority, or $16 million, came from writing down of the carrying value of the Quiksilver trademark. The remaining $1 million related to under-performing retail stores.

Net interest expense for the third quarter of fiscal 2015 was $18 million compared to $19 million in the third quarter of fiscal 2014.