At Volcom, management focused most of the strategic initiatives on the long-term, with CFO Doug Collier opening his presentation at the Goldman Sachs Retail Conference by introducing the company’s “550/50/15” plan.
More specifically, management hopes to achieve revenue growth to $550 million by the end of 2014 while maintaining consolidated gross margins of 50% and returning to operating margins of 15%-20%. Collier outlined several initiatives that would be instrumental in achieving the company’s goals, including improving organization within operations, developing direct-sales platforms and leveraging international brand awareness.
Volcom was a bright spot during a “hit-or-miss” second quarter for vendors, as the surf-inspired apparel manufacturer reported totals sales jumped more than 20% despite weakness from its European businesses.
For the short term, Collier said the company will strive to manage challenges from Asia posed by labor shortages and strikes, wage hikes of as much as 30% and increasing raw material costs. Meanwhile, Collier said the company will continue to emphasize its primary growth driver – existing doors by implementing new ways to drive organic growth. Collier was adamant that VLCM had no plans to acquire new brands or launch new product lines, although he said the company may be open to the possibilities of new licensees or distributors. He also touched on the company’s Junior’s business, which has been a thorn in the side of an otherwise healthy 2010. To rejuvenate the struggling, Juniors’ business, which declined more than 20% in the second quarter, Collier said Volcom has hired a new head of girl’s merchandising and core sales manager in an attempt to “retrench” the business segment. Collier also said VLCM is experimenting with a tiered pricing structure that will incorporate lower price points without dropping ASPs for the entire product line.
Collier added that VLCM has indentified numerous international opportunities, including building on Volcom’s presence in Europe and expanding in Australia, where Quiksilver and Billabong currently rule the roost.
Collier concluded by talking about pre-bookings from key accounts. He admitted that retailers were still feeling the sting of the recession and have turned their focus to at-once orders to help tighten inventory levels while maximizing profits. “I think the general mode is pretty cautious about inventory,” he said, adding that some of Volcom’s accounts didn’t even pre-book for an entire season.
