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Quiksilver Slumps on Downgrade

Shares of Huntington Beach-based Quiksilver Inc. fell after an analyst downgraded the struggling clothing maker’s stock on Tuesday, saying its large debt in a weak economy could make it difficult for it to post profits.

Quiksilver’s stock closed down more than 12% on a market value of about $200 million.

Caris & Co. analyst Claire Armstrong Gallacher downgraded Quiksilver’s stock to “average” from “above average,” saying the company’s profits are “at risk” due to its heavy debt and the retail sector’s downturn.

“Given the large debt burden, tight credit markets and worsening consumer spending trends we would recommend investment in companies with debt free balance sheets,” Gallacher wrote.

Quiksilver, best known for surf-inspired clothes under the Quiksilver, Roxy and DC Shoes brands, has been working on a turnaround since unloading its struggling Rossignol winter sports unit in a November fire sale.

Lingering debt from 2005’s $560 million buy of Rossignol is weighing heavily on Quiksilver, which has seen its stock fall more than 80% in the past year.

Last year, Quiksilver hired Morgan Stanley to help it raise money, possibly by expanding borrowing with existing lenders or by selling shares to investors or a private equity firm.

The company said in December it is working with its lenders in Europe to refinance debt, including a $71 million credit line due in March.

Quiksilver also said it expects to strike a $20 million credit line in Australia and is working on a loan with its U.S. lenders.

Last month, the company said it is on track to restructure debt this month.

Quiksilver said it will cut some 200 jobs in a plan that will save $40 million annually, taking $5 million in charges for the three months through January.

Quiksilver projects a quarterly loss of $12.7 million on a sales gain in the low single digits.

Analysts on average expect the company to report a loss of $11.5 million.

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