For the past few years, Wall Street couldn’t wait for Huntington Beach-based Quiksilver Inc. to sell off its struggling ski unit, Rossignol.
Now, with a deal in hand, it seems there’s no pleasing investors.
Shares of Quiksilver were down nearly 4% near the close of trading Friday with a market value of $990 million.
The stock jumped on word of a Rossignol sale on Wednesday, but started slipping Thursday and continued dropping in a weak market Friday.
Part of the pessimism stems from an analyst’s report suggesting the deal won’t do enough to lower Quiksilver’s debt and comes at a tough time for clothing makers.
Quiksilver is the largest maker of clothes inspired by surfing, skateboarding and snowboarding.
“Getting rid of Rossignol is a good thing, in our view, but the deal doesn’t look to be as favorable as we had thought it would,” said Mitch Kummetz of Robert W. Baird & Co. in a note to clients.
Quiksilver said Wednesday it has struck a deal to sell Rossignol for $147 million to a former chief executive of the French ski maker.
The sale price is a steep discount to the $560 million Quiksilver paid for Rossignol in 2005.
After fees, Quiksilver is expected to see about $100 million in proceeds from the sale, according to Kummetz.
That stands to have a small impact on the company’s projected debt of $1.1 billion at the end of its fiscal year in October, the analyst said.
And Quiksilver’s core clothing business faces tough going as retailers struggle and the euro weakens against the dollar, lessening the advantage the company had selling clothes in Europe.
That led Kummetz to lower his estimates for Quiksilver for the company’s current quarter through October. He also cut his estimates for the 12 months through October 2009.
For the current quarter, Kummetz said he forecasts a profit of $36.7 million, down from an earlier projection of $39 million.
He lowered his sales forecast from $630 million to $599 million.
