Quiksilver Limps Along in the Slow Lane
Things continue to go from bad to worse for Quiksilver (ZQK). The once-trendy retailer and distributor of extreme sports apparel and footwear for outdoor enthusiasts wiped out -- again -- on Friday after posting another horrendous quarter.
Sales declined 19 percent to $396 million as consumers continue to sour on its Roxy, DC and namesake brands. Quiksilver saw fading demand overseas, and the carnage was even worse closer to home, where net revenues plunged 27 percent. Sometimes a chain sees sales slip as it tries to hold firm to its markups, but that wasn't the case here at all, since gross margins also declined during the period. In short, Quiksilver isn't the same magnetic beacon that it used to be for surfers ringing up board shorts and snowboarders looking for gloves and goggles.
Things were even uglier on the bottom line, with Quiksilver posting a huge loss. Even if we back out the one-time hits for restructuring costs and asset impairment charges, we're still looking at an adjusted loss of 20 cents a share. Analysts were holding out for a small profit.
This is the fourth quarter in a row that Quiksilver posted a deficit. It's also the fourth period in a row that it failed to live up to Wall Street's expectations. One can always wonder why analysts hadn't learned after getting consistently burned by Quiksilver before, but hope springs eternal in the summer. That's the time of year when Quiksilver historically shines as beachgoers load up on swimsuits, booties and tide watches.
Then again, this also illustrates how bad things have gotten for Quiksilver. If it can't grow or turn a profit during in summertime, it's going to be a long time before it gets back on a gnarly wave.
Everyone Out of the Water
Quiksilver stock has been one of this year's biggest losers. It has shed roughly three-quarters of its value in 2014.
It's not just investors bailing on Quiksilver. Earlier this year we saw surfing legend Kelly Slater -- the 11-time world champ -- end his 24-year sponsorship relationship with the retailer.
Quiksilver is holding up better at the retail level than it is on the wholesale front, but it's still alarming to see sales plunge 27 percent in the Americas, where it scores half of its revenue.
Back in June it seemed as if Quiksilver investors would finally be put out of their misery. A couple of days after the stock plunged 41 percent on another horrible quarterly report -- yes, 41 percent -- a rumor surfaced about a potential buyout. VF Corp. (VFC), the company behind the Vans and Timberland footwear brands, was reportedly interested in snapping up Quiksilver. The shares moved higher on the news, but the chatter proved hollow.
Quiksilver is on its own. It will probably stay that way.
One Last Wave
One can't blame VF for passing, if it was indeed eyeing Quiksilver. As long as fundamentals continue to deteriorate with every passing quarter, there's no point in stepping up as a savior when the stock will probably get even cheaper after another disastrous quarterly outing.
"We continued to execute against the key initiatives laid out in our profit improvement plan and to drive growth in our direct-to-consumer channels and emerging markets," CEO Andy Mooney said in response to the poorly received fiscal third quarter.
He probably should have cut himself off after the first four words.
There's still hope. However, any shot at a turnaround will probably require closing stores or shedding underperforming brands. It's just not a good time to be in the water if you're a Quiksilver investor.
Motley Fool contributor Rick Munarriz and the Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. Dividend stocks will always be a great choice for investors; read about our top picks in our free report.