Quiksilver, Inc. (ZQK)

ZQK 
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Industry: Consumer Non-Durables
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Quiksilver (ZQK)

Q3 2011 Earnings Call

September 01, 2011 4:30 pm ET

Executives

Craig Stevenson - President of Quiksilver South Pacific and President of Quiksilver Americas

Joseph Scirocco - Chief Operating Officer, Chief Financial Officer and Executive Vice President

Bruce Thomas - Vice President of Investor Relations

Robert McKnight - Co-Founder, Executive Chairman, Chief Executive Officer and President

Analysts

Taposh Bari - Jefferies & Company, Inc.

Mitchel Kummetz - Robert W. Baird & Co. Incorporated

Andrew Burns - D.A. Davidson & Co.

Jeffrey Klinefelter - Piper Jaffray Companies

Diana Katz - Lazard Capital

Jim Duffy - Stifel, Nicolaus & Co., Inc.

Jeffrey Van Sinderen - B. Riley & Co., LLC

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. [Operator Instructions] I would like to remind everyone that this conference is being recorded. I'd now like to introduce Bruce Thomas, Quiksilver's Vice President of Investor Relations who will chair this afternoon's call.

Bruce Thomas

Thanks, operator. Good afternoon, everyone, and welcome to the Quiksilver Third Quarter Fiscal 2011 Earnings Conference Call. Our speakers today are Bob McKnight, our Chairman, President and Chief Executive Officer; and Joe Scirocco, our Chief Financial and Operating Officer. Also joining us is Craig Stevenson, our Americas Region President.

Before we begin, I'd like to briefly review the company's Safe Harbor language. Throughout our call today, items may be discussed that are not based on historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding Quiksilver's business outlook and future performance constitute forward-looking statements, and results could differ materially from those stated or implied by these forward-looking statements as a result of risks, uncertainties and other factors, including those identified in our filings with the Securities and Exchange Commission, specifically under the section titled Risk Factors in our most recent annual report on Form 10-K.

All forward-looking statements made on this call speak only as of today's date, and the company undertakes no duty to update any forward-looking statements. In addition, this presentation may contain references to non-GAAP financial information. A reconciliation of non-GAAP financial information to the most directly comparable GAAP financial information is included in our press release, which can be found in electronic form on our website at www.quiksilverinc.com.

With that out of the way, I'd like to turn the call over to Bob McKnight.

Robert McKnight

Thanks, Bruce. Good afternoon, everyone, and thanks for joining us for our third quarter conference call. I want to begin by offering our thoughts and prayers to those people impacted by Hurricane Irene earlier this week. We're closer to the storm that we normally would be because, in fact, we are conducting our call from New York City this afternoon as we make final preparations for the Quiksilver Pro New York, which kicks off this weekend over in Long Beach on Long Island.

Given the distraction wrought by Hurricane Irene, we were unsure if the event could even proceed, but working closely with Long Beach officials over the past few days, we're excited to be able to report the event will move forward although we've had to adjust the format due to the impact of the storm. But to be clear, the Quiksilver Pro New York is first and foremost about being a surf contest and Long Beach has an incredible surfing history, tradition and spirit. We'd like to say that we're bringing the spirit and stoke of aloha to the Big Apple with this event in some ways similar to how Duke Kahanamoku brought surfing to Australia and the United States a century ago. And I'm stoked to say that the aloha spirit is in full bloom as we cooperate with the community and remain committed to holding a world-class ASP tour event at Long Beach. This way, together, we can promote the sport by bringing the best surfers in the world to this terrific community. We're looking forward to a fantastic event.

Turning now to third quarter. We're pleased to have executed well on our growth plan in the third quarter in delivering solid financial results. Revenues of $503 million in the third quarter exceeded our plan, and we're up 14% when compared to last year and represent a further improvement over the growth we delivered in the second quarter. We feel increasingly positive about our product offerings as sales are strong and retailers have given us rave reviews on our ranges for spring/summer 2012.

Despite global economic pressures, the product offering and brand equity of our 3 core businesses, Quiksilver, Roxy and DC, are strong and resonating with consumers around the world. The portion of our revenue generated by our emerging and developing markets is increasing steadily while our channel expansion for DC and category expansion initiatives, such as Quiksilver Girl and Waterman Collections and Roxy footwear, are delivering good initial returns consistent with our longer-term plans.

Let me now take a brief moment to highlight our brands. I'll start with Quiksilver, the biggest action sports lifestyle brand in the world. We always say that making great product is the key to our success, and I'm proud that we're executing well to plan on that front. Quiksilver product is very strong across many categories, especially in boardshorts and walk shorts. From a category expansion perspective, we are very encouraged by the initial success of the Quiksilver Girls line, which debuted for spring to great success and is on track for a strong follow-up in fall and holiday. In its initial year, the new Quiksilver Girls line, coupled with the Quiksilver Women's business, will generate $15 million and we expect it to be a major contributor of future growth.

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