Quiksilver, Inc. History

Company Perspectives:

"The Quiksilver logo, a cresting wave and snowcapped mountain, represents active sports and global excellence. Our heritage comes from the beach and the sport of surfing and extends out to include other lifestyles where the dictates for fashion and function come from active people with high standards. Since its birth over 20 years ago, Quiksilver has maintained its commitment to performance, style, and endurance and has taken the message around the world. The company credo is built upon our premier brand, Quiksilver. Quiksilver is a worldwide surf/board-riding lifestyle label based on authenticity and reputation for excellence. Our goal is to provide the market with purity of concept and provide our customers product they can wear with pride since it represents quality and value from a solid foundation. Quiksilver's substance lies in its history, its product quality and innovation and its authentic connection to the extreme sports culture. In addition to Quiksilver, Pirate Surf, Que, Roxy, and Raisins represents our complete dedication to the outdoor lifestyle. This dedication has made Quiksilver a world standard."

Company History:

A celebrated name among surfers across the globe, Quiksilver, Inc. designs and distributes casual sportswear, beachwear, and snowboard wear, marketing its apparel under the Quiksilver, Roxy, Private Surf, Que, and Raisin labels. Although Quiksilver produced a broad range of apparel items for several distinct types of customers during the mid-1990s, the company's chief focus has been setting fashion trends for surfers. Founded by two young American surfers in 1976, Quicksilver recorded enviable success with its boardshorts, swimsuits, and other surfing apparel and accessories during its first decade of business. Encouraged by this success, the company's management diversified into other types of active wear during the 1980s and began selling merchandise through department stores, rather than dealing exclusively with smaller specialty shops. The maturation of the narrowly focused start-up company developed it into a multi-faceted corporation that reigned as a market leader during the 1990s.

Origins

The Quiksilver name first appeared in the United States thanks to the entrepreneurial efforts of two inveterate surfers, Robert B. McKnight and Jeffrey Hakman. Hakman was the more accomplished surfer of the two, having won several international surfing championships, but McKnight shared an equal passion for the sport and its attendant lifestyle. Born and raised in Pasadena, California, McKnight graduated from the University of Southern California with a degree in business in 1976, the year he decided to move to Oahu, Hawaii, and spend his days surfing on the island's world renowned north shore. While on Oahu McKnight renewed his friendship with Hakman and together the two surfing addicts discussed their desire to start a business that could finance their days on the beach. They decided to try to get the licensing rights for Quiksilver, a six year-old company based in Torquay, Australia, where it was founded by two surfers, Alan Greene and John Law.

For McKnight and Hakman, obtaining the licensing rights to Quiksilver represented a perfect opportunity to turn their favorite pastime into a vocation. The company's boardshorts and swimsuits, which were tight-fitting and outfitted with velcro straps, were quickly becoming the rage among surfers in Australia, turning the Quiksilver brand name into a highly coveted, trendy label. McKnight and Hakman hoped to achieve commensurate success with the Quiksilver name in the United States, but neither of the two aspiring entrepreneurs thought of creating a beach wear apparel empire, particularly McKnight, whose business intentions were modest. Reflecting on his entry into the business world, McKnight explained, "I thought I could make a few shorts and stay near the beach and party." Despite his less than grandiose plans, McKnight soon found himself guiding the fortunes of a rapidly growing, flourishing enterprise. "I never thought the business would fail," McKnight remembered, "I just didn't expect it to get so big so quickly."

McKnight and Hakman's surprising success with the Quiksilver brand name began in April of 1976, when Hakman entered a surfing competition in Australia. Hakman won the event, and as luck would have it, he met Greene and Law and sat up all night with Quiksilver's owners eating, drinking champagne, and discussing the possibility of securing the U.S. licensing rights to the Quicksilver name. After plates of food and bottles of champagne, Greene and Law agreed to sell Quiksilver's U.S. rights to McKnight and Hakman on one condition, a unique proviso that became the first obstacle the two Americans had to hurdle in order to launch themselves into business. The duty of fulfilling Greene and Law's demand fell solely to Hakman; McKnight, back in Hawaii, could be of no assistance. Greene and Law informed Hakman that they would agree to the proposal provided Hakman ate the large paper doily under his plate, which Hakman promptly did. After swallowing the plate-sized piece of paper, Hakman shook hands with Greene and Law and placed a call to Oahu to tell McKnight of the good news.

McKnight, who spearheaded the business end of the venture, offered the specifics of the proposal to Greene and Law. McKnight and Hakman invested no money, but agreed to pay a royalty of one percent of sales for three years, which jumped to three percent after three years, and an additional one percent of sales to support international promotions. Next, McKnight hurried to secure the capital required to launch the business. He returned to California and asked his father, who was a sporting goods importer, to lend him $20,000 to finance a production run of Quicksilver apparel. McKnight's father agreed, and a few months after Hakman's all-nighter with Quicksilver's Australian owners, the two young Americans were ready to start production for their new company, Quiksilver U.S.A.

McKnight and Hakman debuted their first line of apparel in the summer of 1976. They bought some fabric on credit and manufactured 600 pairs of boardshorts, featuring six separate designs, for their first season. The two entrepreneurs then took their boardshorts, which were priced higher but were more colorful than similar merchandise produced by established rivals Ocean Pacific and Hang Ten, and peddled them to three surf shops in Southern California. With their product distributed, all McKnight and Hakman could do was wait and see if they had made a prudent move. In nine days, the 600 pairs of boardshorts were nowhere to be found on the shelves and racks of the three surf shops, having sold out with encouraging speed.

Several years after their remarkably successful inaugural year of business, McKnight and Hakman found themselves surrounded by a wealth of new competitors, as start-up company after start-up company entered the active beach wear industry. The influx of new competition created a contentious marketing environment for companies like Quiksilver, but McKnight and Hakman kept their operation lean, eschewing debt, and remained tightly focused on producing the type of merchandise that first launched them toward success. Describing this period in the company's history, McKnight noted, "While everyone else was making swimwear, we were setting the standard for surfwear," an approach that would hold Quiksilver in good stead in the decades ahead. "We've been successful," McKnight went on to explain, "because our philosophy has always been to bring the image off the beach and into the stores. Since we were all surfers, we knew what kids wanted."

1980s Expansion

McKnight's commitment to his business strategy successfully carried Quiksilver through its fledgling years, creating a firmly established company by the beginning of the 1980s. The 1980s witnessed a host of sweeping changes that reshaped Quiksilver as it maneuvered through its corporate adolescence, beginning in 1981 when Hakman exited the business, leaving on amicable terms with McKnight to return to Australia and surf. Four years later, a turning point in Quiksilver's history occurred when McKnight took Quiksilver to the next plateau of the retail apparel business and began distributing Quiksilver merchandise to department stores.

The foray into the retail mainstream began gradually and conservatively, manifesting two defining characteristics of Quicksilver's development during its first decade. The move into department stores marked the beginning of the company's evolution into a more sophisticated enterprise. As the 1980s progressed, Quiksilver became more than a business whose chief objective was to finance McKnight's surfing and partying at the beach. A full-fledged corporation was in the making, propelling Quiksilver's growth forward at a substantially faster pace and engendering the attendant pitfalls of rapid growth.

Following McKnight's decision to expand Quicksilver, the company celebrated the conclusion of its first decade of business by completing its initial public offering of stock in December 1986, when annual sales were up to $19 million and the stock market was receptive to small-sized companies like Quiksilver. McKnight and his minority partners sold 50 percent of the company to the public, raising $16 million to bolster Quiksilver's financial foundation as it developed its department store business. With the proceeds gained from the public offering, McKnight bought the Quiksilver trademark for the United States and Mexico, paid off all the company's short- and long-term debts, and expanded Quiksilver's line of production runs in preparation for greater department store business. From 1986 the company operated under the name Quiksilver, Inc.

As Quiksilver intensified its involvement with department stores, eventually distributing its merchandise to retailers such as Macy's, Marshall Fields, Dayton Hudson, and the Dillard Group, McKnight decided to a bring in someone with greater experience in dealing with department stores. In July of 1987, McKnight hired John C. Warner, who at the time was senior vice-president and general merchandising manager of Macy's Department Stores' Denver operation. Initially, Warner was hired as head of sales, but he quickly proved to be a tremendous asset and seven months after joining the company was named chairman and chief executive officer of Quiksilver.

With Warner occupying the two top managerial posts and McKnight serving as president, Quicksilver moved headlong into fostering the growth of its department store business. Sales in 1987 amounted to $30 million and shot up the following year to $48.3 million, while earnings rose to $3.7 million. Sales to department stores made up 40 percent of Quiksilver's $48.3 million in sales in 1988, and offered tangible evidence that the company had made commendable progress into the retail mainstream. The company's range of merchandise had expanded substantially as well, growing well beyond the original line of six styles of boardshorts. Once the sole source of revenue for the company, boardshorts by the late 1980s accounted for only 18 percent of total annual sales, while the balance was derived from a host of different apparel items. T-shirts accounted for 15 percent of total sales, shirts 11 percent, pants 12 percent, fleece wear 9 percent, walking shorts 27 percent, jackets 4 percent, and surfing accessories another 4 percent.

In addition to these products, the company was also moving beyond purely surfing-related merchandise, diversifying its business as the strength of the Quiksilver brand name increased. In 1988, the company introduced six skiwear designs, offering the same number of styles as it had 12 years earlier with boardshorts. The initial success of the skiwear line nearly matched the initial success of the boardshort line, selling out in five weeks and grossing $500,000.

The growing spectrum of Quiksilver products appeared in roughly 2,000 stores nationwide during the late 1980s, including in the original three surf shops that purchased the company's first line of boardshorts in 1976. Fueled by this vast distribution system, annual sales leaped from the $48 million registered in 1989 to more than $70 million in 1989. By this point, when sales to department stores accounted for nearly 50 percent of total sales, some industry observers predicted that the company would become too big and low-price retailers would begin selling their merchandise, a development that would erode profitability and potentially tarnish the appeal of the Quiksilver name to the hard-core surfing set. Aware of the problem, Warner confided to a California Business reporter in 1989, "We have no illusions that our growth as Quiksilver in our existing businesses is limited somewhat down the road, but we want to continue growing and will do so by acquisition, start-up, or licensing."

1990s Diversification

As the company entered the 1990s, it continued to record robust sales gains. Sales in 1990 neared the $100 million mark, fueled by the continued success of the company's traditional line of surfing apparel, but the early years of the decade signalled a disruption in Quiksilver's rousing 1980s rise. Two trends emerged during the early 1990s, both of which negatively affected Quiksilver. First, a nationwide economic recession developed, sending many retailers reeling, particularly the large department stores that accounted for the bulk of Quiksilver's business. To combat the recession, department stores reduced the amount of square footage devoted to selling young men's apparel among other things, which caused Quiksilver's sales to dip. Exacerbating this development was the growing popularity of the "grunge" look during the early 1990s, a fashion style that embraced muted, earthy hues rather than the flashy, colorful styles that had predicated Quiksilver's popularity during the 1980s. As a result, Quiksilver's neon boardshorts were no longer the rage of the day, and the company began to suffer.

To beat back the effects of the recession and changing fashion tastes, Quiksilver diversified its apparel lines and re-focused its efforts toward selling to specialty stores. In 1991, the company acquired Na Pali, S.A., the European licensee of the Quiksilver brand in Europe, and established a subsidiary headquartered in France to design and produce Quiksilver apparel for all countries in Western Europe. By the mid-1990s, Quiksilver was collecting more than 30 percent of its total annual revenues from its European operation, a definite contribution to the company's resurgence by the middle part of the decade. Help came from elsewhere as well, including the company's foray into producing snowboard clothing and its entrance into the market for women's sportswear. Women's sportswear became a key facet of Quiksilver's business following the company's November 1993 acquisition of The Raisin Company, Inc., a manufacturer of women's swimwear and sportswear. Aided by the addition of a strong European business, a return to the specialty and surf shops, and the expansion of its apparel lines, Quiksilver survived the recession and stood firmly positioned as a market leader by the mid-1990s.

During the mid-1990s, Quiksilver derived roughly 40 percent of total revenues from surf shops and nearly 45 percent from specialty shops. After building its department store business significantly during the latter half of the 1980s, the company had largely abandoned these retailers by the mid-1990s, deriving less than 15 percent of total sales from department stores. This shift back to the company's roots was perceived as a positive step by a number of industry analysts, as was the company's encouraging financial growth. Between 1992 and 1995, annual net income rose from $371,000 to more than $10 million, while sales leaped from $89 million to $172 million. As the company prepared for the late 1990s in the wake of this robust growth, expectations were high, fueling confidence that years ahead would strengthen Quiksilver's market position as a dominant force.

Principal Subsidiaries: Quiksilver Europe; The Raisin Company, Inc.; ATI Apparel Trade International; QS International, Inc.

Further Reading:

• Barron, Kelly, "Quiksilver Surfwear Explains Its Third-Quarter," Knight-Ridder/Tribune Business News, September 13, 1996, p. 9.
• Buchalter, Gail, "Fun, Fun, Fun," California Business, July 1989, p. 16.
• ------, "Do What You Wanna Do," Forbes, October 3, 1988, p. 82.
• David, Gregory E., "Quiksilver: Don't Catch this Wave," Financial World, January 17, 1995, p. 18.
• Nelson, Alexandra, "Sadeghi Exits Post at Quiksilver, Inc.," Daily News Record, July 21, 1992, p. 2.
• "Quiksilver Earnings Up 10 Percent, Sales Jump 15 Percent in 2nd Quarter," Daily News Record, September 26, 1996, p. 5.
• Slovak, Julianne, "Quiksilver," Fortune, February 26, 1990, p. 90.

Source: International Directory of Company Histories, Vol. 18. St. James Press, 1997.