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Quiksilver Sees Profit Rise 35% on Strong Sales

Despite the gains, analysts are concerned about $7 million in excess inventory.

September 11, 2003|Karen Robinson-Jacobs | Times Staff Writer

Powered by strong sales of women's clothing in the Americas and menswear in Europe, surfwear giant Quiksilver Inc. on Wednesday posted a 35% increase in fiscal third-quarter profit.

The Huntington Beach-based company's net income for the quarter ended July 31 was $11.9 million, or 21 cents a share, compared with $8.8 million, or 18 cents, a year earlier. The per-share earnings beat Wall Street analysts' estimates by 2 cents.

Revenue in the latest quarter rose 44% to $251.5 million, compared with $175 million a year earlier.

The company makes and distributes clothes, beach and surf apparel under the Quiksilver, Roxy, Raisins and Radio Fiji labels as well as women's swimwear under the Leilani line. It also markets snowboarding equipment under the Lib Technologies, Gnu, Supernatural Manufacturing and Bent Metal labels.

About $20 million of the increase in third-quarter revenue came after the company reclaimed its Asia Pacific operation from a licensee. And with 53 of Quiksilver's 126 company-owned stores in Europe, the company also was helped by favorable currency rates in the quarter.

Overall, Quiksilver sold $62 million in goods to women in the Americas, up 44% from last year's third quarter, while in Europe sales of men's clothing rose 49% to $72 million.

Despite the strong sales gains, analysts were concerned about $7 million in excess inventory in the Americas that Quiksilver said would have to be sold at clearance prices.

"It isn't the normal course of business for them to call out an amount they define as clearance," said Mitch Kummetz, a senior analyst with D.A. Davidson & Co.

Marty Samuels, president of the Quiksilver Men's Americas unit, said the extra goods resulted from a tougher-than-expected spring and some cancellations of summer and fall items.

Even with the reduced margins from the clearance items, Quiksilver expects fourth-quarter earnings of 28 cents a share, up from 25 cents a year ago.

Company officials also said they were comfortable with the consensus estimate of $1.17 a share for the 2004 fiscal year.

Quiksilver released its results after the stock market closed. Earlier Wednesday, the firm's shares fell 36 cents to $17.04 on the New York Stock Exchange. Quiksilver's stock has climbed 28% this year.

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