Volcom’s Q3 Results Beat Estimates, But Q4 Forecast Below Analysts’ Expectations

josh hunter

• October 29 2009
• 527 views
• 2 comments

Conference calls seem like such a foreign thing for an action sports company like Volcom to have to do, but once you’re publicly traded it’s pretty much mandatory. While I’m sure it’s no fun at all for the brand’s executives, it seems like they’re getting pretty good at it.

This time around Volcom was reporting on how it fared in the third quarter of 2009, which ended on September 30. Total consolidated revenues were $93.9 million compared with $111.7 million in the third quarter of 2008. Total revenues in the company’s U.S. segment, which includes revenues from the U.S., Canada, Japan and most other international territories outside of Europe, as well as the company’s branded retail stores, were $56.8 million compared with $72.8 million in the prior-year period. Europe contributed $30.2 million compared to $31 million in Q3 2008.

Here’s what that looks like in chart form. Click on the chart to enlarge it if you need to.

Volcom’s Founder/ CEO/ Chairman Richard “Wooly” Woolcott offered this statement:

“We have worked diligently to capitalize on our company initiatives to create outstanding product and a cohesive brand message aimed toward capturing more market share. We have relied on the strength of the Volcom brand, global marketing programs and sound capital structure to endure the past year and believe we have become a stronger organization. We are ready to compete and maintain our leadership position whatever pace or shape the economic recovery takes.”

If I’m reading that right, that’s a well-scripted way of saying that Volcom feels like it has played its cards right by holding on to cash while continuing to invest in the brand by staying committed to its marketing campaigns (I’m personally a fan of the new B&W denim ads), that it feels like it’s through the worst part of the recession, has learned some lessons along the way, and ended up in a pretty solid spot.

Considering that net cash provided by operating activities for the nine-month period ended September 30, 2009 was approximately $19.4 million compared with $13.8 million in the prior year period, and that the company has approximately $99.3 million in cash, cash equivalents and short-term investments, no significant debt and stockholders’ equity of approximately $216.1 million, I think Woolcott’s reference to a “sound capital structure” is right on the money—No pun intended.

Volcom’s Q3 EPS (that’s earnings per share in case you just started following this kind of stuff) was $0.54 versus estimates of $0.37. But even though Volcom’s quarterly profit beat Wall Street expectations, the company’s Q4 EPS forecast of $0.01–$0.04 are below analysts’ expectations. Or, as Reuters put it:

“Volcom Inc’s (VLCM.O) quarterly profit easily beat market estimates, boosted by a rise in gross margins, but forecast fourth-quarter profit way below analysts’ expectations … For the fourth quarter, Volcom said it expects to earn between 1 cent to 4 cents a share, on revenue of $59 million to $62 million … Analysts’ mean profit view was 11 cents on revenue of $61.9 million.”

On a revenue basis Volcom was estimated to bring in $84.8 million in Q3, but it managed to beat that by about $9 million. Seriously? Can you imagine making $9 million more than you expected to over a three month period? Must be nice. So why such a conservative forecast for Q4? For the fourth quarter, Volcom said it only expects to earn between 1 cent to 4 cents a share, on revenue of $59 million to $62 million.

They attributed it to “myriad complexities in accurately assessing the current state of the global retail environment.” I think that means they’re just playing it safe. If so, it seemed to work out for them in Q3.

Click on the video below to listen to the entire call including the Q&A between analysts and Volcom’s executives that followed.