Owning shares of board sports is beginning to look about as dangerous as the extreme sports they refer to. Volcom
Volcom lowered its fourth-quarter 2007 and full-year 2007 guidance, and is revising its full-year 2008 expectations, too. Maybe most notable is its more negative view for 2008. Volcom had previously said sales and earnings growth of 20% were achievable, but it now expects revenue growth of 18% and earnings growth of just 10%.
It also said it will acquire Electric Visual Evolution for $25.25 million in cash. Electric Visual Evolution is primarily a sports eyewear brand and Volcom said it will continue to operate as a stand-alone brand. The acquisition is expected to have a neutral effect on Volcom's earnings in 2008.
Volcom's lowered expectations aren't too surprising. First off, Zumiez
Secondly, lots of us have noticed many retailers are having difficulties in the current climate. While Volcom has been dipping its toe into its own retail stores, for the most part it distributes through retailers like Zumiez, Macy's
Then again, look to Quiksilver
These tidings seem to imply that young people who opt for brands like Volcom and stores like Zumiez do feel economic pinches; I would have guessed they'd be fairly insulated. And while I have often said that I prefer Volcom over Zumiez as a potential investment (I nominated Volcom as a Black Friday Bargain Stock), the acquisition seems surprising for a company that has grown a strong brand organically. Volcom can afford it -- its balance sheet has $80.9 million in cash, and just a negligible amount of debt as of last quarter -- but is it necessary, or even prudent, in the current climate?
For the most part, I still suspect that for investors with a long-term time horizon, Volcom's one to consider, especially at these prices. However, there are certainly some questions potential investors should ponder before jumping on board.