NEW YORK (TheStreet) -- Quiksilver (ZQK) stock is retreating by 79.14% to 1 cent in pre-market trading on Wednesday morning, after the company's U.S. division filed for chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware.
The outdoor sports lifestyle apparel company requested that the court approve $175 million in new debtor-in-possession financing with affiliates of Oaktree Capital Management (OAK) - Get Report and Bank of America (BAC) - Get Report.
Huntington Beach, Calif.-based Quiksilver said the filing is supported by 73% of the company's senior most class of debt and does not include its European or Asia-Pacific businesses.
"After careful consideration, we have taken this difficult but necessary step to secure a bright future for Quiksilver," Quiksilver CEO Pierre Agnes said in a statement. "Our fresh capital structure, with a very low level of debt for our industry, will enable us to invest in and reinvigorate our brands and products."
Quiksilver is scheduled to release its fiscal 2015 third quarter earnings results today after the market close.
Separately, TheStreet Ratings team rates QUIKSILVER INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate QUIKSILVER INC (ZQK) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Looking at the price performance of ZQK's shares over the past 12 months, there is not much good news to report: the stock is down 84.03%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- QUIKSILVER INC's earnings per share declined by 22.2% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, QUIKSILVER INC reported poor results of -$1.93 versus -$1.43 in the prior year. This year, the market expects an improvement in earnings (-$0.58 versus -$1.93).
- ZQK, with its decline in revenue, underperformed when compared the industry average of 10.3%. Since the same quarter one year prior, revenues fell by 16.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 47.08% is the gross profit margin for QUIKSILVER INC which we consider to be strong. Regardless of ZQK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ZQK's net profit margin of -11.28% significantly underperformed when compared to the industry average.
- Net operating cash flow has increased to -$23.60 million or 18.38% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.49%.
- You can view the full analysis from the report here: ZQK Ratings Report