Investors weren't too stoked about
Volcom 's (Nasdaq: VLCM) third-quarter
results. Is there more to this stock than meets the eye?
Third-quarter net income fell 18.4%, to $13.3 million, or
$0.54 per share. Revenue dropped almost 16%, to $93.9
million. On a more positive note, quarterly gross margin
ticked up a bit to 51.6%, from 49.4% this time last year.
Spending less on promotional activity worldwide allowed the
company to better maintain prices.
Need a serious thrill? Volcom beat analysts' expectations
for third-quarter earnings of $0.37 per share by a long shot.
Less excitingly, Volcom gave a fourth-quarter forecast of
earnings of $0.01 to $0.04 per share, well below analysts'
previous expectations for $0.11 per share.
Volcom still faces what could be a very difficult holiday
season for the retailers and consumer-goods companies to whom
it supplies most of its board-sports-related merchandise,
including
Zumiez (Nasdaq: ZUMZ) and
Pacific Sunwear (Nasdaq: PSUN). The latter,
Volcom's biggest customer, could be a serious problem. In
Volcom's most recent conference call, CFO Doug Collier
acknowledged that revenue from long-suffering PacSun dropped
65%. Nonetheless, I think Volcom's better off than most of
these companies, as long as it keeps its brand strong.
With its seemingly authentic appeal, Volcom seems like a
more attractive prospect than retailers such as
Abercrombie & Fitch (NYSE: ANF) and
Talbots (NYSE: TLB). Abercrombie has reported
gut-wrenching decreases in sales and earnings in recent
quarters, while Talbots has struggled for years under a
mountain of debt.
In contrast, investors who bought Volcom shares back in
March have enjoyed some totally radical gains. The rally has
driven shares into admittedly pricey-looking territory,
relative to competitors.
Company
Trailing P/E
Forward P/E
Projected 5-year annual growth
rate
Volcom
26
19
20%
Aeropostale (NYSE: ARO)
14
11
15% Continued... |