Volcom Inc. on Thursday reported a net loss in the fourth quarter, missing analysts’ expectations, and the economic downturn also led to a first-quarter earnings forecast below Wall Street’s estimates.
This story first appeared in the February 20, 2009 issue of WWD. Subscribe Today.
In addition, the surf-and-skate apparel maker reported cutting its domestic workforce by about 8 percent, affecting 28 employees; reducing executive salaries, and suspending the policy of providing annual guidance.
For the quarter ended Dec. 31, the Costa Mesa, Calif.-based firm reported a net loss of $8.7 million, or 36 cents a diluted share, versus net income of $7.1 million, or 29 cents, for the year-ago period. Excluding a $6.2 million pretax impairment charge and other nonrecurring items, the company had net income of $3.3 million, or 14 cents a diluted share, 2 cents below the 16-cent average estimate of analysts polled by Yahoo Finance. Revenue grew 0.8 percent to $69.6 million, ahead of the $68.5 million consensus estimate and 0.8 percent above the $69.1 million registered in last year’s quarter.
Quarterly gross margin improved to 44.4 percent of sales from 43.4 percent in the prior-year period.
“None of us could have ever imagined the landscape deteriorating the way that it has from just a year ago,” chairman and chief executive officer Richard Woolcott said during a conference call. “However, this is our new reality and we must adjust and manage our business accordingly. This said, our results for the fourth quarter were not acceptable.”
In addition to the impairment charge, Woolcott attributed the company’s weaker results to the highly promotional environment and currency devaluation in Canada, which generated a foreign currency loss of $1.4 million, or 4 cents a share. Escalating costs also played a role, as selling, general and administrative expenses soared 37.3 percent to $26.5 million.
Included in salary reductions is a 15 percent cut in ceo compensation and a 10 percent rollback for the remainder of senior executives.
Volcom has invested in marketing initiatives, such as promotional events with rock bands, and said it has seen positive results.
For the year, profit fell 34.9 percent to $21.7 million, or 89 cents, versus $33.3 million, or $1.37, last year. Sales increased 24.5 percent to $334.3 million from $268.6 million.
In the first quarter, the company expects earnings in the range of 13 cents and 16 cents a share on revenues of between $62 million and $65 million. Analysts expected earnings per share of 26 cents on sales of $75.4 million.