Quicksilver Plunges Over 40% Following Weak Earnings - Analyst Blog

Shares of the athletic goods and apparel company, Quicksilver Inc. ZQK crashed on the index during yesterday's trading session, plunging nearly 41.11%. This was because of the company's disappointing second quarter fiscal 2014 results and a hint at continued troubles ahead as it expects the sales trends of the past quarters to carry forward in the second half of fiscal 2014.

The company reported second-quarter adjusted loss per share of 15 cents, substantially wider than the Zacks Consensus Estimate of a loss of 3 cents per share and also greater than the prior year loss of 12 cents per share.

During the quarter, the company achieved some cadence through the implementation of its ‘Profit Improvement Plan' which was reflected in lowered cost structure, higher gross margin and improved sales in the direct to consumer channel and emerging markets. However, these improvements did not save the day for Quicksilver as sales decline in the wholesale channel, especially in North America and Europe, and of the DC brand played spoilsports.  

The company witnessed a 9% decline in sales that totaled to $408 million. Sales for the quarter also represented a significant decline from the Zacks Consensus Estimate of $451 million. The company reported adjusted EBITDA of $12 million, down about 33% from $18 million in the prior-year.

Furthermore, the company's outlook for the year ahead reveals that there are troubles left for this sports apparel company which has been posting negative earnings surprises for the past few quarters. A glance at the earnings history shows that the company has missed the Zacks Consensus Estimate in 8 of the past 10 quarters, which has resulted in continued fall in its share price.

Coming back to the projections for the second half of fiscal 2014, the company expects the sloppy sales trend of the recent quarters to continue through the rest of the year. The company anticipates a continued fall in wholesale revenues in North America and Europe, while the emerging markets and e-Commerce are expected to provide some solace.

The company expects gross margin to improve through the second half of the year. Meanwhile, adjusted EBITDA for fiscal 2014 is anticipated to remain below the $118 million earned in fiscal 2013. Adding to the negativities, the company has pushed back the timing of reaching its Profit Improvement Plan adjusted EBITDA goal to the end of fiscal 2017.

Quicksilver currently holds a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the textile-apparel industry include Hanesbrands Inc. HBI, Michael Kors Holdings Limited KORS and V.F. Corporation VFC, all of which carry a Zacks Rank #2 (Buy).