Volcom CEO Richard Woolcott struck an optimistic note on the company’s first quarter earnings conference call this afternoon, saying several times that he is seeing a more positive outlook from retailers and manufacturers.
He said retailer and manufacturers have shifted from defense to offense now that the new economic reality has been digested and accepted. Currently, both retailers and manufacturers are looking forward and focusing on what they can do, whether it’s in stores or with product, to improve business and excite customers.
Richard said his sales teams are very in tune with retailers and are seeing signs of optimism. There is an overall sense the tide is turning in a more positive direction, he said.
Here are more details from the conference call:
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First quarter results
(Note: first quarter 2009 figures are compared to first quarter 2008 figures)
Total company revenue: down 15 percent to $68.3 million, slightly above forecast
Net income: down 55 percent to $4.2 million
Gross profit margin: 50.3 percent vs. 52.4 percent.
SG&A expenses: $28 million vs. $27.8 million
Inventory: $22.3 million vs. $19 million
Cash and short term investments at end of quarter: $85 million, with no long term debt.
U.S. results
Includes international sales outside of Europe and Volcom and LSS stores.
Revenues: down 14 percent to $42.4 million
Men’s: down 11 percent to $21.7 million
Girls: down 17 percent to $11.4 million
Boys: down 11 percent to $3.6 million
Creedlers: down 6 percent to $1.9 million
Swim: down 15 percent to $3 million
Five largest accounts: down 12 percent to $13.9 million
PacSun revenues: up 22 percent to $8.4 million. Volcom still expects its business with PacSun for the full year to be down.
Four largest accounts, not including PacSun: down 39 percent as large retailers reduce inventory.
All other accounts: down 14 percent to $28.2 million
Europe
Revenue: down 14 percent to $21.7 million. Down 1 percent in constant currency.
Spain, the UK and some Eastern European countries have been the hardest hit. France has been stable and Germany, Austria, Switzerland and Norway have been strong.
Electric
Revenue: down 32 percent to $4.2 million.
Gross profit margin: 54.5 percent vs. 58.3 percent.
Operating loss: $915,000 vs. operating income of $381,000
Richard said the economic climate is curbing Electric’s ability to maximize sales. Electric did get strong sales in the Mid-Atlantic and Florida from spring break crowds.
Electric is launching an expanded soft goods line for fall that has tripled in size and includes backpacks and luggage. Electric’s soft goods team is now working at Volcom headquarters to tap into Volcom’s soft goods expertise and to create efficiencies. Volcom is also looking for ways to create more operating efficiencies between the two companies.
Electric has also made 50 four-way displays for retailers in North America.
Second quarter guidance
Richard described the second quarter as a transition quarter. Summer orders were taken last October and November at the height of the financial crisis, so many retailers either passed on booking summer or canceled their spring order to make way for summer. In general retailers are ordering closer to season, which is pushing orders back. Previously for back to school, retailers would get their floor sets ready in June. Now, retailers are more interested in receiving those goods in early to mid July.
All of that means there will be a revenue void in the second quarter, Richard said, but Volcom believes it can make up some of those orders in the back half of the year.
Q2 revenue: down 31 to 35 percent to $47 million to $50 million
Q2 PacSun revenue: down 45 percent to $8.7 million
Q2 earnings per share: break even to a loss of 3 cents per share
Other notes from the conference call
President Jason Steris said some areas where Volcom is gaining market share or sees opportunities are: boardshorts, the Creedler sandal program, swim, outerwear, Electric soft goods and denim.
In men’s, Richard said Volcom’s improved boardshorts are having good sell through and denim is very strong.
Juniors is having strong sell through. For spring, dresses, fashion tanks and casual shorts were strong. So far with summer, dresses are very strong again. For fall, retailers have had a good reaction to Volcom Girls denim and its different washes.
Volcom’s swim and sandals are also having good sell through and reorders, Richard said.
With core stores, Volcom is trying to help with in-store appearances by Volcom skater Geoff Rowley to promote the Stone Age collection. It is also extending payment terms to select retailers, and updating window and product displays.
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