Quiksilver Inc. forecast a “small loss” for the three months for its first quarter ending in January and lower-than-expected profits for the 12 months through next October.
In its fourth quarter ended Oct. 31, Quiksilver Inc. swung to a fourth-quarter net loss of $110.9 million, or 89 cents a share, from a net profit of $65.3 million, or 51 cents a share, a year ago. The loss was blamed on goodwill impairment and charges tied to its acquisition of Rossignol and its sale of Cleveland Golf..
On an adjusted basis, the company's net income for the quarter ended Oct. 31 of $65.9 million, or 51 cents a share, was virtually on par with adjusted income a year earlier of $65.8 million, or 51 cents a share.
The fiscal 2007 pro-forma result is in line with Quiksilver's expectations after excluding Cleveland Golf, which was sold earlier this week.
Revenue for the quarter was $779.2 million, compared with $731.8 million in the year-ago period.
Consolidated income from continuing operations for the fourth quarter of fiscal 2007 was a loss of $104.9 million or $0.84 per share compared to income of $65.8 million or 51 cents per share the year before. Net revenues and income from continuing operations for all periods excludes the results of our golf equipment business which are reported as discontinued operations. The loss from continuing operations for the fourth quarter of fiscal 2007 includes $170.7 million of non-cash charges primarily related to goodwill impairment, net of tax.
Consolidated net revenues for the full year of fiscal 2007 increased 10% to $2.43 billion compared to $2.20 billion in fiscal 2006. Our pro-forma net income, adjusted to eliminate the tax-effected special charges (primarily non-cash), for the fiscal year 2007 was $74.2 million or $0.57 per share compared to $94.1 million or $0.74 per share the year before. Consolidated income from continuing operations for the full year of fiscal 2007 was a loss of $98.6 million or $0.80 per share compared to income of $94.1 million or $0.74 per share in fiscal 2006. The loss from continuing operations for the full fiscal year includes $172.9 million of primarily non-cash special charges, net of tax.
Robert B. McKnight, Jr., chairman and CEO of Quiksilver, Inc., commented, “We are pleased to see continuing strength in each of our apparel and footwear brands, which grew their revenue for the year by 19% to $2.0 billion. We believe that we can maintain double digit rates of revenue growth and unlock significant profitability in these businesses over the next several years. These strong results are masked by the difficulties weve experienced in the equipment business, which includes the charge we have taken during the fourth quarter to reduce goodwill. While this is unfortunate, we remain optimistic about our longer-term prospects. We have seen and overcome difficult market conditions at a variety of points in our history and have always emerged a stronger company.”
Bernard Mariette, President of Quiksilver, Inc., commented, “We are focused on three major initiatives. First, we intend to leverage the ongoing success of our apparel and footwear business by expanding our reach into new categories and new territories, increasing our penetration in existing markets and product ranges, and by growing our company owned retail presence. Second, we are creating a closely coordinated global sourcing structure to achieve several points of incremental gross margin for that business. Third, we are focused on helping our equipment business recover from the unusually difficult winter season last year. The state of the market, along with currency movements over the past year has negatively impacted both our revenues and profitability. Even so, we continue to believe that the business will improve over the course of the next two seasons. Our underlying belief that the Rossignol brand holds a tremendous and untapped lifestyle opportunity is unchanged. We are looking forward to growing the brand with a revitalized marketing effort and into a host of new product categories.”
Within consolidated revenues for the fourth quarter, apparel brand revenue grew 22% to $589.3 million from $481.8 million, while equipment brand revenue contracted 24% to $188.2 million from $248.2 million.
Net revenues in the Americas increased 15% during the fourth quarter of fiscal 2007 to $334.8 million from $290.4 million in the fourth quarter of fiscal 2006.
As measured in U.S. dollars and reported in the financial statements, European net revenues increased 2% during the fourth quarter of fiscal 2007 to $350.8 million from $342.4 million in the fourth quarter of fiscal 2006. As measured in euros, European net revenues decreased 7% for those same periods. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues decreased 5% to $91.9 million in the fourth quarter of fiscal 2007 from $97.2 million in the fourth quarter of fiscal 2006. As measured in Australian dollars, Asia/Pacific net revenues decreased 19% for those same periods.
Within consolidated revenues for the full year, apparel brand revenue grew 20% to $2,042.0 million from $1,708.8 million, while equipment brand revenue contracted 22% to $379.2 million from $486.0 million.
Net revenues in the Americas for the full year of fiscal 2007 increased 16% to $1,092.1 million from $939.4 million in fiscal 2006. As measured in U.S. dollars and reported in the financial statements, European net revenues increased 7% during the full year of fiscal 2007 to $1,070.1 million from $1,002.5 million in fiscal 2006. As measured in euros, European net revenues decreased 3% for the year. As measured in U.S. dollars, Asia/Pacific net revenues increased 2% to $259.1 million from $253.0 million in fiscal 2006. As measured in Australian dollars, Asia/Pacific net revenues decreased 11% for the year.
Consolidated inventories increased 15% to $447.3 million at October 31, 2007 from $389.7 million at October 31, 2006. Inventories grew 7% in constant dollars. Consolidated trade accounts receivable increased 13% to $760.4 million at October 31, 2007 from $674.7 million at October 31, 2006. Consolidated trade accounts receivable increased 3% in constant dollars.
The company today outlined initial fiscal 2008 outlook for revenues of $2.7 billion and earnings per share of approximately $0.70. The company also noted that the first quarter is expected to continue to reflect strong apparel and footwear business as well as the effects of a challenging winter equipment market. As a result, the company currently expects to generate revenues of approximately $600 million and to incur a small loss for the quarter.
Mariette continued, “While fiscal 2008 will still hold some challenges in the equipment business, the market has an excellent opportunity to right-size its inventories and return to more normalized levels of sales in next years ski season. We are positioning for this and are working to put processes and people in place to make the most of the opportunity. At the same time, we continue to explore strategies to further reduce our exposure to the non-strategic parts of our equipment business, to repay indebtedness, and to improve our working capital utilization. The sale of Cleveland Golf, which has now been closed, was a great transaction that provides over $100 million of net cash for debt repayment and enables us to better focus on our core opportunities.”
McKnight concluded, “This company has grown tremendously over the years. We have brands that, within their niches, are as strong as any in the world. We have created clear identities and broad appeal for each of them. Weve proven highly capable of communicating their messages to consumers with great product and outstanding marketing. As we look ahead to the future and put the difficulty of the past year behind us, we remain optimistic, confidence in our strengths, and in a position to leverage them on behalf of our shareholders.”
