Volcom Lowers 2008 Outlook, Acquires Electric Visual
It’s been a busy week for Costa Mesa, Calif.–based Volcom.
Fresh off a cross-country trek to Florida for the Surf Expo trade show, the publicly traded industry big shot lowered its fourth-quarter 2007 and full-year 2007 guidance, revised its full-year 2008 expectations, and announced the acquisition of eyewear brand Electric Visual Evolution to the tune of more than $25 million.
As part of the acquisition deal, Volcom will pay for the action sports–related eyewear brand in cash and could pay an additional $21 million over the next three years if certain financial milestones are reached. Electric, whose 2007 net sales reached approximately $23.5 million, was founded in 2000 by Kip Arnette and Bruce Beach in Orange County, Calif. The brand will operate as a Volcom subsidiary and remain a stand-alone brand, selling everything from eyewear to T-shirts, goggles, belts, hats, bags and other accessories.
“Culturally, Electric is a perfect fit for our company,” Richard Woolcott, Volcom’s president and chief executive officer, said in a statement. “We’ve known the Electric team for a long time, and we recognize they share the same passion and love for action sports as we do here at Volcom. Our companies are very much on the same wavelength, sharing similarities in product distribution, marketing efforts and a strong commitment to quality and innovation. Everyone here is stoked to welcome Electric into the Volcom family.”
Beach said the acquisition will allow the Electric Visual brand to expand into new product categories, grow retail distribution and strengthen its operations. Electric Visual currently sells 29 sunglass styles under three core price-point categories as well as six snow-goggle styles. Volcom expects that Electric’s revenue will increase by approximately 20 percent in 2008.
News of the acquisition, which is expected to be earnings-per-share neutral in 2008, came after Volcom announced a more pessimistic outlook for 2008 and lowered its fourth-quarter 2007 and full-year 2007 guidance.
The company, which had previously estimated total revenues for the fourth quarter of 2007 would reach $70 million to $73 million, now anticipates reporting total revenues for the quarter in the range of $67 million to $68 million. The drop is ultimately blamed on a “weaker-than-expected retail environment.”
The lowered fourth-quarter estimates negatively affect the 2007 full-year earnings estimate. Now, the company estimates 2007 earnings to grow approximately 30 percent to between $266 million and $276 million—down from its previous expectations of $270 million to $273 million.
In November, Volcom said it expected to achieve 20 percent consolidated revenue and earnings growth in 2008. The new outlook now puts total revenue-growth expectations at approximately 18 percent and earnings growth at 10 percent.
Volcom’s stock took a dive on the news, dropping 43 cents, or 2.7 percent, to $15.51 per share. —Erin Barajas
