Surf Suffers in the Third Quarter
Three of surf’s biggest players—Volcom, Zumiez and Pacific Sunwear of California—forecasted less-than-sunny fourth quarters.
PacSun saw increased same-store sales for October and raised its fiscal third-quarter outlook but announced it still expects to post a loss for charges associated with asset divestitures. The Anaheim, Calif.–based retailer announced a total sales increase of half a percentage point for October to $85.3 million in sales over the same period last year. Same-store sales for the mall retailer’s PacSun stores rose 2.3 percent for the month. Demo, its chain of mall-based stores with an urban slant, saw same-store sales plummet 22.8 percent. In October, Pacific Sunwear announced that it was looking at strategic alternatives; a possible sale of the Demo chain; and the closure of its newest venture, Ten Thousand Steps, a four-store chain of shoe stores. The closure of Ten Thousand Steps and the potential sale of Demo racked up charges in the ballpark of $53 million, something that resulted in losses of about 30 cents per share in the third quarter.
Zumiez, the Everett, Wash.–based surf and skate retailer, is also feeling the crunch. After announcing same-store sales growth of nearly 14 percent during September, Zumiez reversed course with its most recent earnings report. Sluggish same-store sales in the third quarter prompted the core retailer to issue guidance that fell short of Wall Street’s expectations. In its earnings report released Nov. 8, the retailer announced earnings may be in the range of 92 cents to 94 cents per share—down from an earlier forecast that expected earnings to reach up to $1.01 per share. Zumiez’s stock responded negatively to the news and took a 27 percent tumble.
Zumiez’s and PacSun’s poor performance is biting into Volcom, the Costa Mesa, Calif.–based maker of cool surf and skate apparel that counts both as major accounts, and resulted in a fourth-quarter forecast that is below analysts’ expectations. The surf industry darling announced it expects to earn up to 32 cents per share in the fourth quarter, down from the 47 cents some analysts had forecast. Still, Volcom posted good third-quarter profits, a net income increase of 43 percent and a revenue increase of 49 percent. European operations added $26 million to Volcom’s revenue growth but required a big financial investment that increased 49 percent to selling, general and administrative expenses. Slower sales at retail are resulting in smaller orders from key accounts, including Zumiez and PacSun, and a less-than-vibrant winter snow season is to blame, the company said.
Hurley and Nike Make Million-Dollar Education Pledge
Roger Wyett, Hurley’s chief executive and former vice president of global apparel at the surfwear brand’s parent company, Nike, announced a five-year, $750,000 endowment gift to the fashion design department at Otis College of Art and Design. Bob Hurley, founder and chairman of the surf brand, personally contributed $250,000 to the scholarship fund, bringing the total endowment up to $1 million.
“Nike’s absolute commitment to creative, compelling and innovative design makes it exceptionally easy to support the work of Rose Brantley, chair of the fashion department, and her team,” said Wyett, who recently was named to Otis’ board of trustees. Nike, which has participated in Otis’ mentorship program, is currently collaborating with Otis fashion students on conceptual sportswear inspired by Brazil’s 2010 World Cup soccer team.
Hairy for Charity
Men at Irvine, Calif.–based Quiksilver will have a little something extra going on their top lips for the month of November. The surfwear maker and its charitable arm, the Quiksilver Foundation, are participating in “Movember,” a mustache-growing charity event that encourages men to forgo their razor for a month and raise awareness and funds for prostate cancer and men’s health issues.
Prostate cancer strikes one in every six American men. In 2007, more than 218,000 men will be diagnosed with the disease, and 30,000 will die from it.
Quiksilver chief Bob McKnight, top brass Tom Carroll, team rider Kelly Slater and more than 100 Quiksilver employees have signed on to participate in the event as “Mo Bros.” At the end of the month, proceeds from Quiksilver’s hairy sponsorships will be donated to the Prostate Cancer Foundation, whose goal is to find better treatments and a cure for prostate cancer.
