Quiksilver has found a buyer for its Tony Hawk brand of skateboard apparel as part of its process of concentrating on its core business. The new owner is Cherokee, a company that sells a variety of apparel and footwear products and accessories under brands such as Sideout, Sideout Sport, Saint Tropez-West, Chorus Line and All That Jazz.
Quiksilver made the announcement several weeks after reporting big losses for the fourth quarter and the full year ended Oct. 31. However, the company's new chief executive, Andy Mooney, assured investors that the numerous measures taken in the past year will start bearing fruit during the current financial year.
Among these actions, the group divested its snowboard business, cut down its marketing staff, trimmed down its roster of sponsored athletes, developed an optimization strategy in supply chain management, centralized e-commerce into a single global platform, hired a new product development team and reduced the number of SKUs by 30 percent.
Additionally, Mooney indicated that the Quiksilver brand has an opportunity to expand in closed-toe footwear and that the Roxy brand will strive to expand into more active categories in the sporting goods channel such as fitness. The DC brand of skate-inspired shoes will be “re-energized” through key new products at currently missing price points. The new development team is expected to bring new apparel products to the market for the autumn/winter 2015/15 season, followed by new footwear products in spring 2015.
The group is in discussion with new joint venture partners in China. Brazil and India have also upside for further penetration. On the retail side, the group will devote more energy to e-commerce, where its websites obtained last year a conversion rate of only 1.5 to 2 percent for their 13 million visitors. The Boardriders store concept, which has been adopted by Quiksilver for seven locations in Europe, including one in Russia, will be introduced in the U.S. at a couple of locations in the course of next year.
Mooney pointed out that the company's cost reduction efforts resulted in increases in adjusted operating earnings before amortization (Ebitda) of $3 million in the latest quarter and $7 million in the past financial year, thanks to higher gross margins and lower operating expenses. The gross margin improved to 47.0 percent in the fourth quarter from 45.6 percent in the year-ago period, due in part to better profitability in the Europe, Middle East and Africa (EMEA) region. Better wholesale margins in EMEA did not prevent a decline in the gross margin for the full financial year to 48.2 percent from 48.5 percent.
Total revenues from continuing operations were down because of major drops at DC Shoes. They declined by 10 percent to $476 million in the latest quarter, or 9 percent down on a currency-neutral basis, with DC falling by 25 percent to $139 million. The Quiksilver and Roxy brands were flat at $190 million and $137 million, respectively.
In terms of constant currencies, revenues were down by 14 percent in the Americas and by 9 percent in EMEA, but they increased by 9 percent in the Asia-Pacific region. In absolute terms and in U.S. dollars, EMEA sales declined by 6 percent to $168 million.
In terms of distribution channels, wholesale revenues were down by 12 percent to $353 million. Retail revenues rose slightly to $107 million. Same-store sales were flat, but online sales grew by 22 percent to $16 million. The number of stores was up to 631 at the end of the quarter and the year from 605 at the end of the previous fiscal year.
The company reported a net loss from continuing operations of $175 million for the quarter, up sharply from a loss of $0.4 million in the year-ago period. On an adjusted, pro-forma basis, Quik had a net loss of $7 million against income of $8 million.
For the whole past financial year, the group reported a net loss from continuing operations of $239 million, up from a loss of $18 million in the previous year. On an adjusted basis, a net loss of $38 million for the group's continuing operations compared with net income of $0.1 million.
Total revenues fell by 7 percent for the year to $1.81 billion, and they were down by 6 percent at constant exchange rates. On the same basis, sales decreased by 7 percent for the Quiksilver brand, 2 percent for Roxy and 8 percent for DC. The three brands generated revenues of $721 million, $511 million and $542 million, respectively.
Sales in the EMEA region declined by 6 percent to $632 million for the year, and they were off by 7 percent in currency-neutral terms. They generated an operating profit of $30.8 million, down from $53.6 million in the prior year.