Details From Volcom Conference Call

josh hunter

• April 30 2009
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Volcom, Inc. (VLCM) hosted a conference call for investors on April 30 to discuss the company’s first quarter results. Overall the tone of the call was very optimistic although Volcom’s total consolidated revenue for Q1 2009 dropped to $68.3 million from $80.6 million in the same period in 2008.

Consolidated gross profit for the 2009 first quarter was $34.4 million, equal to 50.3% of total revenues, compared with $42.2 million, or 52.4% of total revenues, in the first quarter of 2008.

Selling, general,, and administrative expenses (SG&A) on a consolidated basis were $28 million in the 2009 first quarter versus $27.8 million in the comparable period in 2008.

In addition, the company has no significant debt and reported having $85 million in cash, cash equivalents, and short-term investments.

Europe has been a bright spot for Volcom, especially in Q1 and Q3, as the European business is highly seasonal and has seen solid growth. However, for first quarter ’09, Volcom’s revenue from the European segment decreased $3.5 million dollars, from $25.2 million in Q1 2008 to $21.7 million in Q1 2009.

Predictions for Q2 results were interesting. Volcom predicts revenues for the second quarter will be between $47-50 million. Volcom’s President Jason Steris says the company is planning its inventory conservatively, and working with manufacturers to shorten lead times in an effort to chase at once business in the second half of the year.

Both Steris and Chairman and CEO Richard Woolcott mentioned in the call that more retailers are being cautious with pre-book orders, moving their ship dates back, and looking for at once opportunities to avoid taking inventory risks. “We’re still in a conservative environment,” said Woolcott.

In some cases, retailers are pushing back-to-school orders that typically hit in Q2 back into Q3. Volcom accounted for this in its evaluation of projected Q2 results.

According to a prepared statement for the call, currently Volcom’s inventory turns once every 54 days in the US. Which is “well above the industry average,” Steris said.

Other optimism came from Woolcott, who said that the company is beginning to gain market share in categories it’s relatively new to, like sandals and swimwear. Categories of increased focus—like boardshorts and outerwear—have also “gained traction” Woolcott said.

Volcom’s executives also stressed that they are seeing “signs of stabilization” in the marketplace, and that retailers are finally rebuilding inventories after being over-inventoried as a result of a slow holiday sales season in 08. Easter was a bright spot for Volcom’s retail accounts according to Woolcott.

“There’s a sense that there is some change going on,” Woolcott said. “We’re optimistic and we’re going to keep fighting.”

The complete results are included below (click to enlarge)