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Details from Volcom conference call

By Tiffany Montgomery
May 02, 2008 4:09 AM

I'm catching up on this one from Puerto Rico.


The biggest news from the conference call was that Volcom had a great quarter despite the tough environment.


The company said several factors helped boost results: an early Easter; better than expected business with PacSun; accelerated orders for Q2 that moved into Q1; Electric coming in above plan; and Europe above plan.


Overall financials


Revenue: rose 59 percent to $80.6 million above the previous plan of $69 to $70 million.


Net income: up 70.4 percent to $9.3 million


Consolidated gross margin: 52.4 percent, up from 52 percent the same period last year


Balance sheet: $72 million in cash, no significant debt


U.S. sales


Total sales: $49.2 million


Mens: up 2 percent to $24.4 million


Girls: down 17 percent to $13.8 million. The decrease was mainly a decrease in the PacSun business


Boys: up 24 percent to $4 million


Creedler: flat at $2.1 million


Girls swim: up 115 percent to $3.6 million

 

Europe


Revenue reached $25.2 million, above the $21 million plan. The company delivered spring goods ahead of schedule. Richard sees continued growth from working on the fundamentals and sees opportunity down the road in expanding into the Northern Scandinavian countries.


Electric


Revenue was $6.2 million. The sunglass brand will begin targeting top motocross accounts in the U.S. and Canada which could add as many as 50 doors to Electric's account base. In the quarter, Electric was profitable vs. an anticipated loss of one cent. Volcom is starting to work with Electric on a soft goods program and Richard sees a big opportunity there in 2009.

 

Results by distribution channel


PacSun business: down 34 percent to $6.9 million. Originally, Volcom had planned for a 40 percent decline this quarter.


Five biggest accounts including PacSun: down 16 percent to $5.8 million


Other accounts: up 14 percent to 32.8 million


More on PacSun business


In the quarter, the PacSun business was a little bit better than expected thanks to Volcom's polo program and other factors. In the second quarter, mens is still expected to be the driver for Volcom at PacSun, but in the fall, the girls business is expected to bounce back, Volcom COO Jason Steris said. The girls program for fall includes sweaters, fleece and some T-shirts.


Environment at core shops


Core shops are feeling pressure, Richard said, and Volcom is trying to help them get consumers in stores by having more autograph signings and offering more gift with purchase programs. Buyers are being more cautious, and Richard believes stores will look at which brands sell through and adjust orders accordingly.


Volcom stores


Currently, Volcom has six stores in the U.S., and four more are planned for 2008 in New York, Boulder, and Waikiki. The company is still looking for the fourth location.


Internationally, new stores include a licensed stores in Indonesia and a reopened store in France. Two additional stores are planned for Europe and Thailand this year. By year end, Volcom will have a total of nine international stores, seven of which are licensed.


Fall orders


Richard said the fall order book looks pretty good, but at the same time retailers are being conservative because of the tough times. He noticed a switch from spring, where retailers felt a slowdown may be coming but weren't all the way sure. Now retailers "are in this slowdown 100 percent," he said.


Guidance


Q2 Revenue: $69 million to $70 million


Q2 EPS: 16 to 17 cents per share


FY 2008 revenue: $343 million to $347 million in revenue, above the previous guidance of $339 million to $344 million.


FY 2008 EPS: $1.56 to $1.59, up from previous guidance of $1.50 to $1.53.


Richard said there could be an upside surprise if results if consumers start walking back into stores and spending a little money.


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