Volcom, Inc. again had another strong top-line quarter in Q1, but the tax man cometh again in the period and erased the benefits to the bottom line. Sales were up across all segments and channels as well as both domestically and internationally. VLCM took a hit on its SG&A line due to investments in its European program and its in-store marketing campaign, but the biggest issue was a 40%+ tax rate this year versus a 1.5% rate last year when VLCM was treated as an “S” corp.

Sales of men’s products increased 39% to $24.8 million for the quarter from $17.8 million during the same period last year. Girls increased 15% to $13 million from $11.4 million, while boys led the growth, jumping 92% to $2.3 million from $1.2 million last year. Sales to the PacSun chain totaled $9.5 million during Q1, up from $7.4 million for the same quarter last year. The chain accounted for 30% of all company sales, increasing from a 24% share last year.

Geographically, sales in the U.S. were $30.5 million in the first quarter, up from $24.1 million last year, but the over all share of sales decreased four percentage points to 75% of sales. International sales were $10 million, up from $6.6 million last year.

The company revised upward its fully diluted earnings per share guidance for 2006 from a range of $1.10 to $1.12 to a range of $1.12 to $1.14. Revenues are expected to increase 25% to 27% over last year to between $200 million and $203 million. For the second quarter, the company expects revenues to increase 26% to 27%. VLCM also said that it expects second quarter fully diluted EPS to be in the 23 cents to 24 cents per share range.

Volcom, Inc. 
First Quarter Results
(in $ millions) 2006 2005 Change
Total Sales $41.6  $31.7  +31.3%
Product $40.5  $30.7  +32.0%
Licensing  $1.1  $1.0  +7.7%
Gr. Margin 51.7% 51.8% flat
SG&A 35.7% 32.7% +300 bps
Net Income $4.4  $5.9  -25.4%
Diluted EPS 18¢ 32¢ -43.8%
Inventories* $7.7  $10.8  -29.2%
Accts Rec.* $22.9  $21.4  +6.8%
* at quarter end