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DC Shoes drives Quik growth in Americas

DC Shoes revenue growth in the U.S. and strong international sales boosted Quiksilver results for its core apparel and footwear brands in the second quarter.

Consolidated net revenue from continuing operations - Roxy, DC, Quiksilver and other apparel brands - increased 15 percent to $596.3 million. Consolidated income from continuing operations grew 20 percent to $38.7 million.

Americas revenue

Revenues from apparel and footwear brands grew 5 percent to $247.6 million. The growth was driven by DC, while Roxy and Quiksilver sales were slightly down.

DC footwear and apparel continues to buck the tough economic trend. “It’s our Buckle,” said Marty Samuels, left, president of Quiksilver Americas, referring to specialty chain The Buckle, one of the few retailers that is performing well. In every down cycle, there are a few overachievers and “DC is one of those, thank goodness,” Marty said.

Europe and Asia/Pacific revenue

In Europe, revenues increased 23 percent to $284.5 million. In Asia/Pacific, revenues grew 23 percent to $62.5 million. These segments received some benefit from favorable currency exchange rates.

Rossignol now a discontinued operation

During the quarter, Quiksilver moved Rossignol hardgoods and apparel into discontinued operations as the company moves to sell the division. Quiksilver recorded a non-cash charge of $240.2 million to write down the value of the Rossignol business.

Bob McKnight said the list of buyers for Rossignol has been whittled down to a select group that now has the confidential data about the division.

Net loss

With Rossignol results and the special charge included, the company recorded a net loss of $206.2 million vs. a net loss of $4.8 million the same quarter last year.

Quiksilver stores

Same-stores sales are down in the U.S. About 50 percent of Quiksilver stores are in California, Nevada, Arizona and Florida - states hard hit by the mortgage crisis. Quiksilver stores in Europe are also experiencing softness, especially in France, Spain and the U.K.

Climate in different retail channels

Marty said the environment doesn’t seem to be that different in various retail channels. His sense is that business is a little tougher for department stores. In the core market, stores seem to be flat to down 5 percent, with the East Coast, Hawaii and Florida getting a boost from warmer weather.

Global expansion

Quiksilver sees additional expansion opportunity in newer territories such as Russia, China and Latin America.

Investing and cost cutting

The company is continuing to invest in major initiatives such as Quiksilver Women’s, DC apparel, Latin America and E-commerce. At the same time, Quiksilver is trimming costs with better sourcing, slower retail store growth and other expense reductions.

Loss of DC PacSun business

Marty said DC has offset most of the loss from PacSun dropping footwear with a “huge” pickup in orders from Journeys and Zumiez and DC entering the department store chain with apparel.

Guidance

The company expects full year revenue for continuing operations to grow 10 percent to $2.25 billion. The guidance assumes no improvement in current trends.

Earnings per share should come in slightly below the 90 cents per share in fiscal 2007. Regionally, U.S. revenue will rise low single digits, Europe in the mid teens and Asia/Pacific 15 to 20 percent. Europe and Asia/Pacific will receive some benefit from favorable exchange rates.