Overall stock prices were battered again today, and notable action sports heavyweight Quiksilver stock closed at $0.88. What does this mean for one of the oldest and most recognizable brands in the action sports industry???
Moody’s Investors Service lowered the brands ratings on the apparel maker (NYSE: ZQK)., due to weakening liquidity and reliance on short-term debt following the sale of its Rossignol ski equipment business. Last week, Quiksilver finalized the sale of its Rossignol to Chartreuse & Mont Blanc. It had been trying to sell the brand, which had been incurring operating losses, for most of the year. Quiksilver received 30 million euros, or $37.5 million, for the Rossignol deal.
Moody’s said the company has weakened liquidity following the sale, and also received smaller-than-expected leverage from the sale. While the deal was considered a positive since it was losing money, “Quiksilver funded the seasonal build in Rossignol’s inventory through the date of sale, and the net cash sale proceeds (which were reduced in the revised final purchase price) were insufficient to retire the associated working capital debt,” Moody’s said in a statement.
The New York Stock Exchange requires companies to maintain an average closing price over 30 days of at least $1. If a company receives a non-compliance notice from New York Stock Exchange, it has six months to take action before the stock could be suspended from trading or delisted. Nasdaq announced about three weeks ago that it was temporarily suspending its $1 rule for three months because of market turmoil.
Other action sports brands such as Volcom, closing at $7.08, and major industry retail Pac Sun have also felt the beating of the market as their stocks closed down today as well. Pacific Sunwear closed today at $1.18, seemingly following in Quiksilver’s downward path. As the holiday season approaches, the need for big Q4 numbers is immeasurable if we expect to see any future and longevity in the brands there were once the foundation of the action sports industry.