Quiksilver Inc.’s shares took a beating last week, but its management might have an ace or two up its sleeve to get the company on track in the second half of the year.
The Huntington Beach-based apparel manufacturer and retailer lost more than a third of its market value after it announced a $46 million net loss on $408 million in revenue for the quarter ended April 30.
It stopped the bleeding with a small bounce in the following couple of days, but its stock remained down more than 60% year-to-date, with a market value near $600 million.
The plan is to cut prices to compete with fast-fashion retailers and count on the more than 800 stores Quiksilver owns or licenses to help revive the company’s brand.
“Our brands compete well against vertical retailers in our owned and operated retail and e-commerce channels, and we have restructured and repriced the lifestyle component of our apparel offering to be more competitive,” Quiksilver Chief Executive Andy Mooney said during an earnings call last week. “With 70% of the media (budget) being spent in the fall and less inventory in the wholesale channel, we anticipate sales growth for Quiksilver apparel for [this] fall to improve and those improvements to continue on into [next] spring.”
Mooney touted a new collection of shoes that will carry skateboarder Nyjah Huston’s name. It will be launched by the company’s DC Shoes division in coming months.
DC Shoes had $103 million in revenue in the April quarter.
“The big initiative that we have in place … is to aggressively enter the largest single segment of the market, which is the accessibly priced vulcanized canvas footwear,” Mooney said. “Were we to attain only 5% share of that market, DC as a brand could double in size. We have never competed in that segment before, but we will complete in that segment aggressively from spring ’15.”
The launch of the $70 shoes will be supported by a “significant marketing campaign,” he said.
Advance orders from retailers have set records for a DC shoe, Mooney said. Other styles in the DC collections have been discounted for the fall in what he called a “band-aid operation,” garnering some “moderate success … but not enough … to convert us to growth for fall.”
Next year’s spring season will feature a new women’s line, dubbed Beatrice, priced between $45 and $50. Mooney called that range a “sweet spot for product” that offers “a margin opportunity for [our] retail partners, which we did not have before.”
Quiksilver is adopting a similar strategy with pricing apparel, according to Mooney, who said the company’s brand is more frequently competing with “fast fashion” retailers such as H&M, which offers board shorts and swimwear for about $20 each. That compares with the $60 price on Quiksilver boardshorts at specialty surf shops.
“So that is the significant chasm between two price points,” Mooney said. “I think if you’re going to be with the mall-based specialty retailer in the lifestyle segment, we don’t intend to be [at] $20, but we probably have to be much less than $60. … The paradox is, historically we’ve gone with the very high initial goods margins with high prices—good quality product, high-gross margins, high prices. It doesn’t sell at first blush. It gets marked down, and the leftovers” are sold at discounts.
The company also will focus on increasing the percentage of revenue it gets through its own stores compared with wholesale shipments to other retailers, which currently account for about 70% of sales. E-commerce sales were a bright spot for Quiksilver in the April quarter, when they grew 23% to $30 million. That revenue is part of sales at the company’s own stores and could have a key role in the effort to cut its reliance on wholesale.
“We’ve seen the direct-to-consumer sales mix continue to increase, and we anticipate that we will continue to invest both in the e-commerce platforms and [expand] the e-commerce peripheral or the periphery into new markets where we’re not currently selling to our consumers that way. And we’ll continue to invest in retail stores,” he said. “And so moving from the 70-30 [ratio of sales to other retailers compared to its own stores] to 60-40 is a target that we anticipate.” n
