I doubt anybody’s too surprised that Volcom’s (NASDAQ:VLCM) fourth-quarter results reflect the pain that many retail and consumer-facing stocks are experiencing. I guess the wild “youth against establishment” may be rebelling against establishment by not spending much money.
Volcom swung to a loss of $8.7 million, or $0.36 per share, compared to net income of $7.1 million, or $0.29 per share, this time last year; nope, that’s not exactly something to be stoked about. Revenue was basically flat on a year-over-year basis.
The company took a non-cash impairment charge on goodwill and intangible assets of $0.46 per share related to last year’s acquisitions of Electric Visual and two Laguna Surf and Sport stores. (Unfortunately, it’s no surprise to anybody, I think, that last year’s acquisitions might be worth a lot less now.)
Volcom said it’s working on balancing being aggressive about opportunities while reducing costs; at the moment, though, it appears to be aggressively cutting costs through an 8% workforce reduction and decreasing salaries throughout the company.
I like many things about Volcom and have long eyed it as a potential investment. It seems to truly understand and immerse itself in board sports culture, and I prefer it to similarly themed retailers like Zumiez (NASDAQ:ZUMZ) and Pacific Sunwear (NASDAQ:PSUN). (Volcom does business with both.) Volcom’s sponsorship of competitions and its dabbling in music, concerts, and other media gives admirable authenticity to its brand, and I have been pretty cynical about other retailers that sought to appeal to niche teen culture and styles, like Hot Topic (NASDAQ:HOTT).
Volcom looks pretty cheap trading at about 9 times earnings. However, Volcom did get very trendy there for a while, so one might wonder if that trendiness is fading. It always ran the risk of facing a backlash with core skater and surfer types, too; it is, after all, a corporation, even if it’s smaller and seems “independent.” Back when I was a teenager, brands associated with publicly traded companies weren’t big with real skater types -- Nike (NYSE:NKE) springs to mind as a good example of a huge company that didn’t go over (in 2006, in fact, I wrote about a skater boycott of Nike). I wouldn’t be surprised to see similar anti-corporate rebellion spring up now as the economy sinks.
Volcom is a cool business, but then again, things are pretty dire these days and consumer behavior is evolving. There are some considerations investors must weigh before jumping aboard Volcom, especially since it looks like it’s going to be tough for many niche and specialty retailers to keep themselves from wiping out in 2009.
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