Volcom, Inc. management feels it has successfully weathered the economic storm to-date and Chairman and CEO Richard Woolcott believes “the skies are beginning to clear.” In a conference call with analysts, Woolcott said revenues derived from the core level are still down year-to-date, but they don't appear to be deteriorating further and are actually beginning to show some signs of recovery.
Overall, Third quarter revenues declined 15.9% to $93.9 million, compared with $111.7 million in the year-ago quarter. Total revenues in the company’s U.S. segment, which includes revenues from the U.S., Canada, Japan and most other international territories outside of Europe, as well as the company’s branded retail stores, were $56.8 million compared with $72.8 million in the prior-year period, a 22.0% decrease. Revenue exceeded previous company guidance of $51 million to $54 million, “due primarily to better than projected demand for Volcom products.”
In the U.S. region, men's product revenue decreased 19% to $24.5 million for Q3, compared with $30.2 million in the third quarter of 2008. Volcom girls' product revenue decreased 46% to $10.9 million, versus $20.0 million in Q3 last year. Woolcott said the juniors' business is tough, “with competition from the vertical, fast fashion, price point-driven retailers.” Snow revenue decreased 3% to $15.5 million, compared with $15.9 million last year.
Boys' revenue, which includes the company’s kids' line, decreased 6% to $4.7 million, compared with $5.0 million in the third quarter of 2008. Revenue from the Creedlers footwear line was $136,000, versus $316,000 in Q3 of last year. Revenue from the girls' swim line was $65,000, versus $71,000 in Q3 last year.
Revenue from Volcom’s five largest accounts decreased 53% to $14.4 million for the third quarter, representing 26% of U.S. segment product sales. In Q3 of 2008, revenue from VLCM’s five largest accounts was $30.8 million, and represented 43% of U.S. segment product sales.
Revenue from PacSun, the company’s largest customer, decreased 65% to $6.6 million for the quarter, or 12% of U.S. segment product revenue. Last year, revenue from PacSun was $18.8 million, or 26% of VLCM’s U.S. segment product revenue. The decrease was said to be on plan and reflected in the company’s guidance. The PacSun business for the first nine months of the year was down approximately 42%. Excluding PacSun, revenue from the next four largest accounts decreased 35% for the quarter.
International product revenue, which is reported as part of the U.S. segment and consists primarily of sales in Canada and Japan and does not include licensing revenue, was $18.2 million, or 32% of the U.S. segment product revenue for the quarter, compared with $14.5 million, or 20%, for the comparable period in 2008. This increase was primarily due to incremental revenue in Japan as a result of the acquisition of the Volcom distributor in Japan in Q4 of last year.
Total revenues in the company’s Europe segment declined 2.5% to $30.2 million compared with $31.0 million in Q3 2008.
Total revenues in the company’s Electric segment were $6.9 million compared with $7.9 million last year.
Consolidated gross margins were up 220 basis points to 51.6% of sales. Consolidated net income for the third quarter was down 18.5% to $13.3 million, or 54 cents per diluted share.
