Quiksilver's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Quiksilver (ZQK)

Q4 2011 Earnings Call

December 15, 2011 4:30 pm ET


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

Bruce Thomas - Vice President of Investor Relations

Unknown Executive -

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


Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division

William M. Reuter - BofA Merrill Lynch, Research Division

Unknown Analyst

David E. Griffith - Roth Capital Partners, LLC, Research Division

Claire Armstrong Gallacher - Auriga USA LLC, Research Division

Adam F. Engebretson - Piper Jaffray Companies, Research Division

Jeffrey Wallin Van Sinderen - B. Riley & Co., LLC, Research Division

M. Grant Jordan

Taposh Bari - Jefferies & Company, Inc., Research Division



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 Fourth Quarter and Full Year Fiscal 2011 Earnings Conference Call. Our speakers today are Bob McKnight, our Chairman, President and Chief Executive Officer; and Joe Scirocco, our Chief Financial Officer. Also joining us today are Craig Stevenson, our newly appointed Global Brand President and Chief Operating Officer of Quiksilver, Inc.; and Rob Colby, our new Americas region President.

Before we begin, I'd like to 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 B. McKnight

Thanks, Bruce. Good afternoon, everyone, and thanks for joining us for our fourth quarter and year-end conference call today. I'm pleased to report that Q4 was another quarter of solid financial performance, and that fiscal 2011 was a good year for our company despite some challenging headwinds. Most importantly, we improved our business in fiscal 2011 through prudent investment and careful execution to begin delivering on our long-term plan that calls for significant revenue growth and substantially higher levels of profitability. Let me begin with the high-level financial highlights from the fourth quarter. Revenues in Q4 were $545 million, up 10% when compared to last year, reflecting the continued economic recovery in the Americas along with the improvements we made to our U.S. retail business in both product and merchandising.

Additionally, our e-commerce business continued its strong growth trajectory with revenues up 69% on a global basis. Gross margins declined 160 basis points to 51.9% of sales, the result of higher sourcing costs. Pro forma SG&A at $240 million was 40 basis points lower as a percentage of sales than in the same quarter a year ago. The resulting pro forma adjusted EBITDA in the fourth quarter was $57 million, roughly in line with our Q4 last year. I'd now like to take you on a brief tour of our regions, touching on some brand updates along the way.

Starting in the Americas, our business is healthy and continues to show signs of improvement along several measures. Sales in our own retail stores continued their strong run comping up 16% in the fourth quarter. That trend has continued into the current holiday sales period as November also comped up double digits. In the wholesale channel, sales were up 11% in Q4 and Quiksilver, Roxy and DC all grew. Similarly our Americas e-commerce business grew 77% in Q4. Our business in Latin America also continues to do well, particularly in Brazil, where we have decided to open a second retail store in Porto Alegre, as we continue to invest in this growing market.

Both Quiksilver and Roxy experienced strong bookings for spring and summer 2012, and we're excited about their momentum. Additionally, we remain on track with our other major growth initiatives in the Americas as well, of which there are many. Let me give you a couple of examples. We see a large opportunity to expand our addressable market in the middle part of the United States and Canada by adding cold weather outerwear to our product range, much like we've successfully done in Europe. The first step in this strategy is the launch of the Quiksilver mountain division at Outdoor Retailer Show in Salt Lake City in January 2012.

This new Quiksilver line will feature apparel with an emphasis on highly functional performance and reliability for a wide range of outdoor conditions. The product will appear in stores in July 2012 and we're very excited about the line and its long-term potential. And the winter collection of our Quiksilver Girls and Women is currently shipping to our accounts and the response has been fantastic. We look forward to expanding our offering for fall 2012 based on the market feedback we received this year.

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