Volcom, Inc. posted another strong quarter in Q4, but saw Uncle Sam take a major piece of earnings with an increased tax rate as a result of the companys public stance. During a conference call with analysts discussing the quarterly and annual results, management focused on two initiatives that the company will work on during the coming year: an increased presence in Europe and the opening of new retail stores.
Fourth quarter revenues increased 35.8% to $41.2 million, compared with $30.4 million in the fourth quarter of 2004. Gross profit as a percentage of total revenues increased to 48.8% from 47.8% in the fourth quarter of 2004. Mens revenues totaled $24 million, a 34% increase from $17.9 million during last years fourth quarter. Girls increased 28% to $13 million from $10.2 million last year. Boys increased 93% from a small base to $2.1 million. The Snow segment increased 59% to $1.1 million. Domestic revenues accounted for 83% of the total at $33.6 million, with the majority of the remaining $6.8 million coming Canada and Japan. Sales to PacSun increased 10.6% to $12.1 million for the quarter, but decreased 7 points as a percentage of total sales to 31%.
Net income for the fourth quarter of 2005 increased 14.9% to $7.2 million from $6.2 million. Diluted earnings per share decreased to 29 cents from 32 cents during last years quarter. As a result of the companys going public, the tax rate changed from 1.5% to 27.2%, taking a bite out of the bottom line. Operating income before taxes increased 45.7% to $9.3 million, compared with $6.4 million for the fourth quarter of 2004.
Volcom is currently in the process of transitioning its European efforts from a licensee structure to one in which Volcom has complete control of the brand. The company is continuing to develop its headquarters in the southwest of France and will setup a separate Swiss company that will hold the license for the brand in Europe, which management expects to reduce worldwide income tax expense over time. On the owned-retail front, the company is expanding its store in LaBrea and plans to open a premium store in San Diegos Gaslamp district and an outlet shop in Tulare, Calif.
For 2006, the company expects revenues to increase 24% to 26% over 2005 to approximately $198 million to $201 million. Diluted EPS are expected to be in the range of $1.10 to $1.12, including a six cents per share charge resulting from the approximately $2.5 million to be spent in bringing Europe online. For the first quarter of 2006, management expects sales increases in the 25% to 26% range over the first quarter of 2005. Diluted earnings per share are expected to be 13 cents to 14 cents as a result of higher operating expenses as the result of the rollout of an in-store display program as well as the investment in European operations.