LOS ANGELES--(BUSINESS WIRE)--Ryan Drexler, president and shareholder of Consac, LLC, said today that he believes Quiksilver, Inc.’s (NYSE:ZQK) 17-month-old turnaround plan is a failure and called on the Board of Directors to explore options to sell the company. Mr. Drexler’s Consac owns in excess of 2 million shares of Quiksilver.
In a letter to the Board, Mr. Drexler said Quiksilver’s 11-point Profit Improvement Plan (PIP) has had a profound detrimental effect on the company’s financial position and operating performance.
Mr. Drexler is an investor in consumer and retail companies, as well as the former operator of a well-known consumer brand. As such, he said he was profoundly disappointed with the company’s performance over the last year and a half.
He noted that the stock price had fallen roughly 80% this year, and the $42.2 million operating loss (excluding impairment losses) for the first three quarters of fiscal 2014 is a significant deterioration from the $11.4 million operating profit (excluding impairment losses) for the same period in fiscal year 2013.
In the letter, Mr. Drexler pointed out that Quiksilver stated in its most recent annual report that by the end of fy2016, the PIP was expected to improve adjusted EBITDA by approximately $150 million over fy2012.
However, he said, adjusted EBITDA for the first nine months of fy2014 is down 77% compared to the same period in fy2013 – deteriorating from $60.6 million in the first three quarters of fy2013, to $14.1 million in the same period this fiscal year.
The most telling measure, Mr. Drexler said, was the revenue decline in the company’s three core brands, Quiksilver, Roxy and DC, which was down 17%, 9% and 34%, respectively.
“The revenue decline by brand indicates to me that the company’s fashions have fallen out of favor, its targeted advertising is out of touch with today’s consumers, and it has failed to take the necessary steps to maintain market share and profitability,” Mr. Drexler said.
“I believe that to continue on the present course would not be in the interests of shareholders based on the company’s deteriorating performance since the PIP was announced,” he added, “and, quite frankly, in my opinion, to continue on this path would be the height of folly.”
He said the company’s well-known brands, global retail and wholesale presence and supply chain still have value that should be unlocked and maximized for shareholders with the sale of the company through a competitive process.
About Consac, LLC
Consac, LLC ("Consac") invests in the securities of publicly traded and venture-stage companies. Consac may increase, decrease, dispose of or change the form or substance of its investment in Quiksilver, Inc. for any or no reason, at any time. Consac also may change its views about Quiksilver, Inc. at any time. Consac disclaims any obligation to notify the market of any such changes.
The information and opinions contained in this press release and the letter attached hereto are based on publicly available information about Quiksilver, Inc. Although Consac believes the statements it makes in this press release and such letter are accurate in all material respects and do not omit to state material facts necessary to make those statements not misleading, Consac makes no representation or warranty, express or implied, as to the accuracy or completeness of the statements contained in this press release or such letter and expressly disclaims any liability relating to those statements (or any inaccuracies or omissions herein or therein). Thus, shareholders and others should conduct their own independent investigation and analysis of those statements and of Quiksilver, Inc. Furthermore, some of the statements herein and in the letter attached hereto are forward-looking statements, estimates, projections and opinions. Such statements, estimates, projections and opinions may prove to be substantially inaccurate and are inherently subject to significant risks and uncertainties beyond Consac's control.
The statements that Consac makes herein and in the letter attached hereto are not investment advice or a recommendation or solicitation to buy or sell any securities, nor is Consac soliciting any proxy or other action from or by any shareholder. Except where otherwise indicated, those statements speak as of the date made, and Consac undertakes no obligation to correct, update or revise those statements.