Volcom Announces Secondary Offering
Volcom executives are finally reaping the benefits of years of hard work.
Nearly six months after its initial public stock offering, sportswear maker Volcom Inc. announced that insiders would be selling 5 million shares of their common stock on the open market.
All the money from the stock sale will go to the individuals, such as Volcom’s executives and directors, and not to the company. No date has been set for the stock sale.
“There are millions of shares that are held by the directors and the officers of the company,” said Wade Huckabee, a company spokesman. “This is a way to transfer a small portion of that stock to the public through a formal offering.”
Said Jeffrey Van Sinderen, a retail analyst with B. Riley & Co. in Los Angeles: “This sort of thing is fairly common for a company that has various lock-up periods that prevent selling certain restricted shares.”
Many of the shares were given as bonuses, perks or to investors before the company went public.
Volcom’s first foray into the stock market was at the end of June, when it sold 5 million shares of common stock with a starting price of $19. It raised $80 million from that first stock offering. Currently, the stock is selling for about $32.45 on the Nasdaq.
The rapidly expanding apparel company, based in Costa Mesa, Calif., has 24 million shares outstanding. Nearly 80 percent of those shares are held by insiders. That includes Richard Woolcott, the 39-year-old president and chief executive who founded Volcom in 1991, and his 73-year-old father, Rene Woolcott, chairman of the board.
The father and son hold about 38 percent of Volcom’s shares. Other major stockholders include the Malcom Trust, which owns nearly 20 percent of the stock, and the McElroy Family Trust, which owns 5.2 percent of the stock. Thomas McElroy was on the board of directors from the time the company was founded until February 2004. He was vice president, chief brand officer, from September 2003 to July 2004.
For the secondary offering, Wachovia Securities will be the managing underwriter. Piper Jaffray and D.A. Davidson & Co. will be co-managers.
Volcom has been on a major expansion spree in recent years. In 2004, the company’s net income leaped 72 percent to $24.6 million on $113.2 million in revenues. Net income for the nine months ending Sept. 30, 2005, was $22.2 million on revenues of $116.25 million. Richard Woolcott is expecting 2005 sales to jump 39 to 41 percent over 2004.
Volcom makes a popular line of young men’s and women’s surf- and skate-inspired apparel that appeals to the casual California-style wardrobe worn by many of today’s teenagers. About 28 percent of its apparel is sold through Pacific Sunwear of California Inc., a hip retailer based in Anaheim, Calif., that caters to the surf and sun consumer.
Volcom is not only popular in the United States, but also around the world, and that trend may be growing. The brand is planning a major expansion to Europe at the end of 2006 when its licensing agreement expires with its European licensee. Volcom plans to establish its own operations there. In preparation for that, Volcom on Oct. 25 finished the acquisition of Welcom, the Swiss distributor of Volcom-branded products in Europe, for $1.5 million.
The company also has several licensing deals with companies in Australia, Brazil, South Africa and Indonesia.
Most of Volcom’s apparel is manufactured in China, India and Mexico. Two Chinese manufacturers, Ningbo Jehson Textiles and China Ningbo CIXI, doing business as Dragon Crowd, make about one out of four Volcom garments. The company’s lineup of apparel includes T-shirts, retailing for $19–$32; board shorts, selling for $40–$64; and denim, selling for $50–$125.
—Deborah Belgum
