Quiksilver (ZQK) reported Q2 earnings and tried to put a positive spin on its position as the world’s leading outdoor sports lifestyle company. At least that’s what it said in the earnings release. But take a minute and think about a few issues with this hot fashion-forward company.
Trade receivables have a huge write-off component. Some 15% are being reported as bad debts. Thanks for the heads-up, but that is a disaster. No information on where geographically or what products. A little bit of pricing compression, and this will blow up big time.
It has a huge impairment charge without any information about what became worthless. If an investor understood what parts of the enterprise were becoming less valuable or had become worthless, he could make what is called an informed decision. Right now the investor is blind.
Final complaint: It suddenly has a $40 million tax bill while losing money. No real discussion about how it got run over on that one.
It may be cool on the beach and surfers do not pay for product, but it seems to be a shambles in the board room. So with this nonsense on the balance sheet, the stock pops very nicely on Friday on above average volume. The market was generally down at the same time.
Robert B. McKnight, Jr., chairman of the board, chief executive officer and president of Quiksilver, commented, “We are pleased with our operating results for the quarter.” Hey, you left a few things out. Funny the stock popped the way it did. Or did everyone just look at the margins and go nuts?
Disclosure: I hold no positions in stocks mentioned in this post. I have no plans to initate new positions within the next 72 hours.