Cut off the arm to save the body: Quiksilver case study

How hard is it to systematically dismantle your business? Every business owner knows that launching is often the most difficult part of any new enterprise. But deciding when to draw the line on an underperforming product or service or, as in the case of Australian icon Quiksilver, an entire branch of the company can be equally as tough. In September of 2015, Quiksilver’s U.S. operations filed for Chapter 11 bankruptcy in the US court system, a move that allows the company to continue trading while undergoing a reorganisation process to better service their debts. Quiksilver’s troubles in the U.S. trace back to 2013, having made a loss that year of $309.4 million and suffered a drop in sales of 14%. These losses were in part due to Quiksilver’s difficulty in adequately capturing its core demographic of active young people in the United States. Despite this inability to attract attention to their brand, Quiksilver optimistically moved into U.S. department stores, a move that would have been costly to effect even if the company were able to move sufficient stock to cover the expenses. The brand’s inability to appeal to young people in America remains a significant issue and following their filing for bankruptcy, Quiksilver president Greg Healy noted that the debt incurred from these failings were instrumental in their decision to place the company under what essentially amounts to administration. This news followed that of the opening of Quiksilver’s 16th Boardriders concept store here in Australia in the same month and Mr Healy was prompt in pointing out that Quiksilver’s “European and Asia-Pacific businesses and operations remain strong and are not part of this filing.” Quiksilver had made the decision to cut off the arm to save the body. Investing heavily in their U.S. operations despite the failure of their brand in attracting their core demographic, Quiksilver continued to make optimistic moves that reflected their global growth, rather than their local losses. Realising the flaw in their logic, they acted quickly to save their company before it went under and more importantly, before it started to significantly impact their global offerings. Quiksilver U.S. is now undergoing a ‘debtor-in-possession’ plan with Oaktree Management which will provide around $175 million in financing to the company as it is reorganised to address their debts into the future. It might be hard to know when to draw the line and harder to act on an underperforming offering, especially when you’ve invested heavily in

July 13, 2023

Uncategorized

How hard is it to systematically dismantle your business? Every business owner knows that launching is often the most difficult part of any new enterprise. But deciding when to draw the line on an underperforming product or service or, as in the case of Australian icon Quiksilver, an entire branch of the company can be equally as tough.

In September of 2015, Quiksilver’s U.S. operations filed for Chapter 11 bankruptcy in the US court system, a move that allows the company to continue trading while undergoing a reorganisation process to better service their debts. Quiksilver’s troubles in the U.S. trace back to 2013, having made a loss that year of $309.4 million and suffered a drop in sales of 14%. These losses were in part due to Quiksilver’s difficulty in adequately capturing its core demographic of active young people in the United States.

Despite this inability to attract attention to their brand, Quiksilver optimistically moved into U.S. department stores, a move that would have been costly to effect even if the company were able to move sufficient stock to cover the expenses. The brand’s inability to appeal to young people in America remains a significant issue and following their filing for bankruptcy, Quiksilver president Greg Healy noted that the debt incurred from these failings were instrumental in their decision to place the company under what essentially amounts to administration.

This news followed that of the opening of Quiksilver’s 16th Boardriders concept store here in Australia in the same month and Mr Healy was prompt in pointing out that Quiksilver’s “European and Asia-Pacific businesses and operations remain strong and are not part of this filing.” Quiksilver had made the decision to cut off the arm to save the body.

Investing heavily in their U.S. operations despite the failure of their brand in attracting their core demographic, Quiksilver continued to make optimistic moves that reflected their global growth, rather than their local losses. Realising the flaw in their logic, they acted quickly to save their company before it went under and more importantly, before it started to significantly impact their global offerings. Quiksilver U.S. is now undergoing a ‘debtor-in-possession’ plan with Oaktree Management which will provide around $175 million in financing to the company as it is reorganised to address their debts into the future.

It might be hard to know when to draw the line and harder to act on an underperforming offering, especially when you’ve invested heavily in it. But take a page out of Quiksilver’s book, because suffering a setback on something you’ve worked hard for is almost always better than losing everything.

Author

Andrew Quinn

With 17+ of experience, Andrew Quinn is a transformative force in the insolvency industry, challenging conventional approaches to business turnaround.