I stopped by the Volcom shareholder meeting Tuesday morning to hear the company’s review of fiscal 2007 and its plans for the future, and to meet some more of the management team.
The meeting was held at the Volcom roadhouse on Placentia Avenue in the skatepark in the back of the building. I saw Duke Edukas of Surfside Sports there, and CEO Richard Woolcott’s parents – his father and chairman of the board René Woolcott and his mother, Eloise, pictured above with Richard.
A lot of the information in the formal presentation has been covered in the company’s conference calls, but it’s always good to hear it all pulled together in a condensed presentation.
Some 2007 highlights
Europe: The company took the European business in-house in 2007, launching on time and on budget in the second half of the year. Volcom built its own building in Anglet, France and now has 90 employees there. European revenue in the second half of 2007 came in above plan at $36 million. That momentum helped in the first quarter of 2008, which also came in above plan. Volcom financed the expansion with existing resources and did not incur debt with the project.
New categories: Girls swim, sandals and slippers and a boys line launched in 2007.
Category breakdown by sales: Mens, 51 percent; Girls, 29 percent; Snow, 8 percent; Boys, 8 percent; Footwear, 2 percent; Girls swim, 1 percent; Other, 1 percent. Richard said he likes this balance. In snow, he said it’s good to take advantage of opportunities but doesn’t want to be too heavily weighted in snow that a bad season hurts results.
Distribution: Richard said there is strength across all levels of distribution including core accounts, speciality stores and department stores. Volcom has reduced its dependence on one single customer, namely, PacSun.
Volcom retail: Six stores are now open. The goal is to showcase the Volcom brand, better control its distribution and destiny, but the company will be sensitive with existing retailers, Richard said.
Annual inventory turns: 8.2, compared to the industry average of 4 or so, CFO Doug Collier said.
2007 financials: Sales rose 31 percent to $269 million. Net income rose 16 percent to $33 million.
The go forward plan
Brand strength: The company will focus on its athletes, marketing, relationships with retailers and vendors, and product quality/brand integrity.
Strengthen product categories: Richard’s sees opportunities to strengthen Volcom’s six product categories and to grow Electric’s sunglass and goggle business. A future project includes launching Electric softgoods.
Distribution: “I feel pretty good about our distribution platform,” Richard said. He sees opportunity at all levels by growing in existing doors with more product category penetration and as retailers grow and add doors.
Europe: The goal this year is to strengthen the infrastructure, increase brand awareness, and maximize current distribution. “We’re focusing on the basics and the goal is to execute correctly this year.”
Global: Richard put up a slide with a map of the world, what he called “the opportunity slide.” He noted the growth potential for Volcom in South America, South Africa, Australia, Europe, Japan, and other regions. “If done right and executed correctly, Volcom can become a powerful, global brand. We are on our way.”
Strategic acquisitions: Richard said there may be more in the future. Also, he said during the question and answer period that he wants to keep cash available to take advantage of any opportunities that may come up during these tough times.
