Volcom Q2 Profits Drop 22.6%

Volcom lowered its earnings outlook for the year after it announced yesterday that second quarter profits dropped 22.6%.

Net income at the Costa Mesa based company slipped to $4.8m , or $0.20 per share, from $6.2m, or $0.25 per share in the same period last year.

However, despite the soft retail environment revenues for the three months to 30 June jumped 25.6% to $72.5m from $57.7m last time.

“The strength of the Volcom brand continued to resonate with our customers domestically and abroad in the second quarter,” said Richard Woolcott, Volcom’s chairman and chief executive officer. “We believe our multi-pronged diversification strategy is providing us with more means to successfully weather the challenging retail environment. We are focused on the fundamentals of our business, which will ultimately make us a stronger company in the long term.”
In the second quarter, gross margin was flat at 48.0%, and operating income fell to $6.9m from $8.8m.

Despite what it sees as a continued soft retail market for the rest of the year, for the third quarter, Volcom expects total revenues of $109m to $110m – up 20% to 21% over last year’s third quarter. Earnings per share are expected to be $0.63 to $0.64.

For the full year of 2008, Volcom expects consolidated revenue of between $344 million to $347 million, which is generally in line with its previous estimate. This estimate includes a full year’s contribution from the company’s European operation, which was operating at full capacity beginning in the third quarter of 2007, the financial contribution from the acquisition of Electric Visual Evolution in January 2008, and the contribution from the acquisition of Laguna Surf & Sport, which is anticipated to close later this month. Earnings per diluted share expectations have been reduced and are anticipated to be in the range of $1.50 to $1.53 versus previous guidance of $1.56 to $1.59.