Wednesday Market Watch: Quiks Costly Lesson

True to form; the higher you fly the farther you have to fall. Quiksilver’s ski dreams seem to be lining up for that free fall. The rumors have been rumbling through the snow industry for awhile. When those rumors begins to gain steam with Wall Street analysts and make headlines on ‘Market Watch’ …you know something is up.

Motley Fool recently reported that Quiksilver (NYSE: ZQK) is considering three different options for it’s Rossignol brand. Rich Duprey from the Fool goes on to say:

“The company plans to keep the brand name and continue a Rossignol apparel line, but it wants to unload the hard goods segment. Quiksilver has done well selling well-known clothing lines like Roxy and DC Shoes to its target teen market, but I think it made a serious error in buying the entirety of Rossignol two years ago. The ski maker had been facing declining sales and rising costs before the buyout, while losing market share to K2 and others.”

Duprey makes a good call when he calls up the Peter Lynch buzz word”de-wors-ification. Let’s bring everybody up tot speed the basic thought behind de-wors-ification is when a profitable company takes profits and puts them into a new business line they don’t fully understand or have a deep knowledge of. The end result typically is failure of the most miserable kind. It’s a nice play on the word “diversification” and the ensuing backfire.

Duprey and Lynch are onto something here. Should quik have ever gotten into skiing? Well, they got into snowboarding successfully with Mervin. However, for all intents and purposes Lib and Gnu were left alone to develop as brands. The fact that those critical years saw some pretty amazing steps forward in snowboard popularity and the ensuing sales. Rossignol, carrying a stigma and some excess sales (or lack there of) baggage certainly had a long uphill battle ahead of them. Whoever, takes over the hardgoods line for Rossignol should be prepared to shoulder that burden. The key to Rossi’s success will be in reviving their once great product name through a blend of nostalgia and product innovation. They must become aggressive and revitalize their brand. Otherwise, I’ll be telling my Daughter about another company when she wants to know about corporate failure.

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