Volcom Posts Strong Sales Gains; Tax Rate Cuts into Bottom Line Improvement…

Volcom posted another strong quarter, but an increased tax rate hurt otherwise strong gains on its bottom line. Sales were up across all segments and regions, with the exception of the Snow segment, which saw flat growth on the loss of the Galyan’s business.

The Men’s segment posted a 47.3% increase to $24.3 million in the third quarter, while the Girl’s business also posted a strong increase, jumping 45.5% to $14.7 million. The Boy’s segment saw sales increase 15.6% to $2.3 million from $0.9 million last year. The Snow segment posted flat sales at $8.4 million, but would have been up roughly 10% excluding approximately $800,000 in Galyan’s business in Q3 last year. Good news for the Snow segment comes from Chick’s Sporting Goods, where Volcom will be selling in eight of the company’s eleven doors. Geographically, the U.S. constituted 83% of total sales, with sales increasing 34.4% to $41.8 million, while International sales, which occur mostly in Canada and Japan, jumped 59% to $8.3 million.

Operating income increased 58% to $15.4 million, but a tax rate increase from 1.5% last year to 29.8% this year cut net income growth.

VLCM’s backlog at quarter-end was up 37% to $58 million, seen as a mixture of Holiday and Spring orders, with Spring “a little bit stronger.” The company expects full year revenue growth of 39% to 41%, up from previous guidance of 34% to 37%. Gross margin for the fourth quarter is expected to be consistent with Q3 at 50% of sales.