Fashion

After yesterday’s Quiksilver conference call we kind of knew this was coming, but Reuters is now reporting that the company’s stock fell more than 20 percent in early trading based mostly on word that Quik was looking to sell off assets.

Analyst Eric Tracy of BB&T Capital Markets said in a note to clients that the company’s view of a muted cash generation, coupled with an extension of its credit line makes an asset sale unavoidable. . . “We believe the company may seek to sell its DC business to a strategic or financial buyer,” the analyst said, while expressing his worries that by selling DC, Quiksilver “would lose its fastest-growing, highest-margin business.”

That’s the rub isn’t it? Reminds us a little of Stephen King’s story Survivor Type.

[Link: Reuters]

{ Comments on this entry are closed }

If there was one thing to take away from today’s Quiksilver conference call (and there really was only one) it was this: Quiksilver management is focused on strengthening its balance sheet by increasing liquidity and improving its capital structure.

That line was repeated over and over. CEO Bob McKnight said it. Then then unflappable CFO Joe Scirocco would say it again. During the call we imagined that line billboarded on the wall of the Quiksilver conference room as a reminder to use it as an answer for every question.

It began making more sense when Scirocco laid it all out like this:

“In our current business plan we believe we have adequate liquidity in each region for the forseeable future. Nonetheless the current retail environment is significantly uncertain and we believe that we should further improve liquidity,” he said. “To that end we expect to decide on the course of action sometime between now and the end of June. We expect to increase liquidity either through a sale of assets or by issuing secured debt as well as to arrange committed credit facilities from our European banks and a new ABL with our US lenders.”

The European lenders who yesterday gave Quiksilver a three-month extension on their 55 million Euro loan expect to be paid before June 30. And Quiksilver expects to solve a $316 million debt problem on the same timeline. What are their options? Scirocco was about a direct as he could legally be:

In terms of what types of asset sales we’re looking at,” he said. “We’ve looked at everything (some are more strategic than others) and yeah they could include a brand. What we’re after here in terms of a strategy is liquidity and improving the capital structure.

Oh really? During the Q&A several analysts tried to ask the DC Shoes question. Some very cleverly worded their questions regard the DC Shoe business and what a hypothetical sale would mean to Quiksilver but Scirocco stayed firm and answered all the questions thoughfully, reminding everyone that he really couldn’t talk about specifics related to their plans to increase liquidity.

One thing is certain: we will all know before June 30, 2009. And if we were betting . . .

[Update: In other news Reuters is reporting that Quik has hired mergers and acquisitions bank Peter J. Solomon to “help find funding or an investor.”]

{ Comments on this entry are closed }

Quiksilver has just released their numbers for Q1 2009 and while $59 million sounds like a lot to lose, there is nothing all that surprising in the report. Net revenues were down 11 percent to $443.3 million vs. $496.6 million in the first quarter of fiscal 2008. The company lost $59 million on the quarter, but if you throw out one-time charges ($6.1 million in severance charges in the Americas and $50.8 million “non-cash charge to write off deferred taxes” in the US) then it was only a $9 million loss.

Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “While our performance in the quarter was in line with our overall expectations, deteriorating macro conditions made for a very difficult operating environment. Weak consumer traffic drove lower sales and margin compression which resulted in a loss for the quarter.”

The conference call starts a 1:30 PT (click here to listen) or follow the jump for the entire release.
[click to continue…]

{ Comments on this entry are closed }

According to a Form 8-K filing today with the SEC, Quiksilver’s big Euro lender paying has been pushed off until June 30, 2009.

On March 9, 2009, a French subsidiary of the Company, Pilot S.A.S. (“Pilot”), entered into an amendment to its € 55,000,000 Line of Credit Agreement (the “LC Agreement”) with Societe Generale, BNP Paribas and Credit Lyonnais (collectively, the “Banks”) pursuant to which the Banks extended the LC Agreement from March 14, 2009 to June 30, 2009. This amendment will become effective March 13, 2009, subject to the satisfaction of certain closing conditions. The Company intends to conclude either a strategic or refinancing transaction within the period covered by this extension, in which case, the indebtedness subject to the LC Agreement would either be refinanced or repaid.

Interestingly, the lender has increased the interest on the loan to EURIBOR plus 2.8% from EURIBOR plus 1.6 and tacks on a .5% administration fee and “requires a mandatory prepayment of the LC Agreement upon the occurrence of certain events (e.g., sale of the Company’s Quiksilver, Roxy or DC Shoes trademarks or businesses, termination of the Company’s French tax consolidation, or the default under or cancellation of certain other debt arrangements).”

What does this all mean? Well, it looks like the lenders want to get paid straight away if Quiksilver decided to sell something. Maybe tomorrow’s conference call will help sort things out.

[Link: Hoovers.com via Transworld Business]

{ Comments on this entry are closed }

Orange County Business Journal writer Michael Lyster reports on exactly what the financial world is looking for from Quiksilver when the company reports results from first quarter of fiscal 2009 tomorrow.

More than results for the January quarter, “What matters much more than this is whether or not the company is able to restructure its uncommitted debt, and we would expect to get an update on this issue,” analyst Mitch Kummetz of Robert W. Baird & Co. said in a note to clients this week. . . . Kummetz and other company watchers have been eagerly awaiting word on Quiksilver’s efforts to rework its near-term debt.

All we keep thinking as we contemplate Quik’s upcoming $71 million debt payment to a European lender is: Beware the ides of March.

[Link: Orange County Business Journal]

{ Comments on this entry are closed }