Many snow sports companies watched their business melt at the retail level during the recent warm winter. In particular urban sporting goods stores in Europe and the USA, whose customers have seen very little snow during the past few months, if any, are stuck with lots of unsold skis, and they are likely to place very few orders for next winter, waiting for the snow to fall before committing themselves in any major way.

With its financial year ending in October, the Quiksilver group is going to be hit twice by the abnormal weather pattern of the past season – both in terms of Winter 2006/07 reorders and of preliminary orders for Winter 2007/08. After a sales decline of 25 percent in the quarter ended last Jan. 31 for the combined hardgoods operations of the group, its Rossignol subsidiary is now predicting a drop of 20-25 percent in its preliminary orders for winter sports equipment to be delivered this year, precipitating the share price of the parent company to very low levels.

As reported, Quiksilver has revised its sales projections for Rossignol several times over the last few weeks, angering certain investors who are frustrated by the fact that the value of their Quiksilver shares has plummeted by 30 percent during the past year. Some shareholders who evidently don’t know the European winter sports equipment industry well expressed their frustration to us even after a lengthy investors’ day held at the company’s new “Mountain Center” in Park City, Utah last March 12.

The management reiterated several times during the event that the unpredictably warm weather, for which it could not be held responsible, was the main cause of the slump. It pointed out that Rossignol’s annual production capacity has already been cut down from 1.7 million to 1.2 million units, and that Rossignol’s French factory at St. Etienne de Crossey will be shut down by the end of this year. Operating expenses will be reduced, but the operating margin will not return to normal levels until at least 2008. The management continues to regard the Rossignol group as a major opportunity because of its leading position in the global ski market.