Quiksilver (NYSE: ZQK) designs and sells sportswear and equipment for young, outdoorsy costumers. Its Roxy and Quiksilver brands, which together account for almost 60% of revenue, sell casual apparel, wetsuits, and winter gear, while its popular DC brand targets young skateboarders. The company sells its products through its own company stores and through department and sports specialty stores. The company earned $2 billion in revenue but incurred a net loss of $192 million in 2009.
In a sluggish economy, retailers like Quiksilver suffer because consumers cut back on spending on discretionary items. Rather than spending money on full-priced brand name items, consumers can find the same items for lower prices at discount retailers like TJX Companies (TJX).
Quiksilver brands represent a casual lifestyle for young-minded people that connect with our boardriding culture and heritage. The company believes that surfing, skateboarding, snowboarding and other outdoor sports influence the apparel choices made by consumers as these activities are communicated to a global audience by television, the internet, movies and magazines. People are attracted to the venues in which these sports are performed and the values they represent, including individual expression, adventure and creativity. The company's products are sold in over 90 countries in surf shops, skateboard shops, snowboard shops, proprietary stores, and select department stores.
The majority of Quicksilver’s revenue comes from its apparel segment, which the company sells through its network shops and in department stores. With the weakness in its sporting goods business, the apparel segment is likely to increase in the future, as it has generated strong earnings for the company.
Like many sporting goods companies, most of Quicksilver’s sports apparel and equipment are sold in specialty stores and sports shops, which account for over three quarters of revenue. Included in this number are some 500 stores that Quicksilver either owns or with which it maintains licensing arrangements. The company distributes casual apparel through Macy’s, Dillard's, and Bloomingdales department stores, which account for about a tenth of revenue.
Geographically, the company's revenue distribution is:
Recent trouble in the credit markets, coupled with high gasoline prices, have the potential to depress consumer spending, thereby impacting Quiksilver's bottom line. If these factors lead consumers scale back on vacation travels to beaches and ski resorts, Quiksilver's equipment business is particularly vulnerable.
However, some factors may serve to protect Quiksilver's bottom line: its products are moderately priced and are focused on a very specific segment of the market—those interested in purchasing wetsuits and snowboards have a relatively small variety of businesses to choose from.
Department stores in the United States have undergone significant changes in recent years. In response to declining margins, stores have implemented tighter inventory controls and have scaled back the quantities of merchandise that they purchase from wholesalers like Quiksilver. As a means of increasing market share, companies have also sought to differentiate themselves from the competition by demanding exclusive contracts and store-specific private labels (e.g. Ralph Lauren's "American Living" line for J.C. Penney).
Although department stores currently account for only 10% of Quiksilver's distribution, retail apparel and footwear have been the company's strongest segment in recent years. As the company seeks to capitalize on this growth (and shy away from its equipment business), department stores may become a bigger part of Quiksilver's business model.
Quiksilver competes with a variety of brands in the outdoorswear and sporting goods industry. V.F. Corporation owns Reef and Vans, two popular brands in the surfing community that compete against Roxy and Quiksilver for that community's dollar. Quiksilver also competes with Nike, as both companies sell skateboarding and aquatic apparel and footwear.