As U.S. sales flourish towards a solid second quarter return, executives at Volcom continue to remain cautiously optimistic, citing a learned skepticism in the overall economy. Richard Woolcott, chairman and CEO of Volcom, supported that sentiment in Volcom’s recent conference call with analysts.
“Overall, the retail landscape is still somewhat choppy. There are some bright spots at all levels of distribution, but there also seems to be an inconsistent outlook for the balance of the year. Our business with core shops is generally doing well and continues to grow; however, there are retailers that are still having some difficulties.”
In the second quarter, the East Coast seemed to outperform the West Coast (potentially due to increasing temperatures driving beach-goers) while some Gulf accounts were hit by the impact of the oil spill. In normal fashion, Hawaii profited, as tourism rises, and the central and eastern parts of Canada performed strongest in the Canadian territory.
In the prior quarter, the company’s initiatives looked to focus on maximizing wholesale distribution; drive international growth, as well as increase direct-to-consumer business and e-commerce. However, Woolcott shed some light on new initiatives, born of a desire to work a bit closer to the vest.
“As we have previously mentioned, we are experimenting with some new distribution in Spain and France, but our primary focus now is less on expanding distribution and more on being increasingly productive in the doors that we are already in,” said Woolcott.
The story for the second quarter was the U.S. segment as earnings from the region accounted for roughly 80% of consolidated revenue for the company’s second quarter, jumping 16.5% to $50.8 million compared with $43.6 million in Q2 of 2009. More specifically, Men's and Boy’s product flourished, with revenue increases of 38% to $32.8 million and 20% to $5.2 million, respectively. For those segments, Volcom believes the higher-than-market growth clearly indicates market share gain. Good news for the manufacturer, as Junior’s product continues to offset growth, decreasing 22% to $9.4 million versus $12.1 million in the second quarter of last year. Volcom plans to stabilize the category over time by updating the junior’s product direction as well as making infrastructural changes within the department.
Sales for the company’s top five accounts have trended well, although revenues from PacSun, Volcom’s largest account, decreased 2% to $8.7 million for the quarter, or 17% of U.S. segment product revenue. According to Doug Collier, Volcom’s CFO, “This was generally in line with our expectation of flat compared to Q2 last year.”
Total revenues in the company's European segment fell 13.6% to $5.1 million, compared with $5.9 million in the same period in 2009. The decrease primarily reflects a difficult macroeconomic environment in Europe during the spring, as well as a decrease in the foreign exchange rate used to translate sales in euros to U.S. dollars. On a constant currency basis, revenue in Europe decreased 9%.
Electric Sunglasses also experienced strong gains as sales took off in the U.S. segment. Revenues increased 41% to $6.6 million, compared with $4.7 million in 2009.
Overall consolidated revenues increased 20.9% to $62.5 million as compared with $54.2 million in the second quarter of 2009. Net income was $68,000, or breakeven per diluted share, compared with $872,000, or 4 cents per diluted share, in the year-ago period.
