Shares of Volcom Inc. slid $1.70, or 9 percent, to $17.17 Friday after the extreme sports vendor issued lower-than-expected fourth-quarter earnings guidance, and said it foresees further inventory liquidation heading into the fourth quarter.
For the third quarter ended Sept. 30, the Costa Mesa, Calif.-based firm’s net income contracted 1.5 percent to $13.1 million, or 53 cents a diluted share, compared with income of $13.3 million, or 54 cents a share, in the year-ago.
Quarterly sales improved 11.4 percent to $104.7 million from $93.9 million in 2009. Analysts were looking for earnings of 52 cents a share, on net revenues of $104.2 million, Yahoo Finance said.
Gross margin for the quarter shrank to 49.6 percent of sales, versus year-ago margin of 51.6 percent, due to inventory liquidation, a subject that once broached, was difficult to get off the minds of analysts on the company call.
According to Volcom, it will have to clear about $3 million in excess inventory in the fourth quarter.
On the call, Richard Woolcott, co-founder, chairman and chief executive officer, said the firm anticipated a stronger second half when it was making plans for the year. “We just had a little bit of a higher expectation that the economy and then that consumer spending, especially in our environment with consumer goods and apparel, was going to be stronger than it actually is today,” he said.
The ceo said that while the economy has not “bounced back” in the second half of the year as expected, the firm’s inventory load is “manageable.”
For the nine months, Volcom’s net income jumped 12.6 percent to $20.7 million, or 85 cents a diluted share, compared with income of $18.3 million, or 75 cents a share, in the 2009 period. Revenues spiked 13 percent to $244.6 million from $216.5 million.
For the fourth quarter, the vendor anticipates EPS of between 4 cents and 7 cents on sales of between $76 million and $79 million. This translates to full-year EPS ranging from 89 cents to 92 cents on sales of between $321 million to $324 million.
Analysts projected quarterly EPS of 11 cents on revenue of $72.7 million, and year-end earnings of 94 cents a share on sales of $316.9 million.