Volcom says revenues rise

In a business in which image is critical, will young surfers and

skateboarders care that Costa Mesa clothing makers Volcom Inc. have

gone corporate?

Probably not, said Paul Burnett, president of Surfside Sports, a

Balboa Island retailer.

“The average guy on the street, that’s not his thing,” Burnett

said Tuesday.

On Monday, Volcom announced earnings figures for the second

quarter of 2005, the first time it has released quarterly numbers

since becoming a public company.

Volcom Chief Executive Richard Woolcott said he was pleased with

the figures.

The numbers showed revenues for the period rose 47.1% to $35.9

million. Profits dipped slightly from $5.1 million to $4.6 million.

The company attributed the change to the increased taxes Volcom is

required to pay as a public company.

Volcom’s figures prompted Joseph Teklits, an analyst with Wachovia

Capital Markets, to give the firm a “market perform” rating, which

means Teklits thinks investors should hold -- but not buy or sell --

Volcom stock. Wachovia started covering Volcom after Monday’s

announcement.

In a report, Teklits wrote that while Volcom has the ability to

grow -- perhaps by as much as 20% for the next three to five years --

he does not expect Volcom’s stock price to rise much in the next six

months to one year.

Tuesday, Volcom’s stock price was $31.25 at the close of trading,

down from an opening price of $32.

Teklits’ report acknowledged Volcom’s need to maintain its

action-sports image while it evolves as a corporation. He noted that

the company sells different goods to its target audience -- people

who frequent surf shops -- than to mall consumers. Outside of

specialty shops, Volcom sells in Nordstrom and Pacific Sunwear

stores. Surf and skate shops tend to carry edgier styles than mall

stores.

One of Volcom’s strengths is the company’s ability to sell its

clothing to fans of different board sports, industry analyst Marie

Case said. Case is the managing director of Board-Trac, a Trabuco

Canyon company that tracks the wave-riding, skateboarding and

snowboarding markets.

In Case’s eyes, Volcom made a smart move earlier in the company’s

evolution by reaching out to snowboarders without losing its

beach-based reputation. Case, like Teklits, believes the average

surf-wear buyer cares about a manufacturer’s image.

“I think that is important to the extreme -- that the consumer can

understand and associate with the culture that’s at the core

heritage,” Case said.

As far as Volcom’s image goes, Woolcott said he only wants to

market gear that he can stand behind.

“I’m more concerned with quality and integrity,” he said. “I want

to be proud of what we’re doing.”

Most teenage surfers and skateboarders don’t read the business

pages, Burnett said. However, people noticed in 2002, when Hurley

International, another Costa Mesa surf-wear company, became a

subsidiary of Nike Inc.

“When Hurley got absorbed by Nike, people were concerned about

that route. So far, that hasn’t been a problem,” Burnett said.

Before about five years ago, surfing and skateboarding enthusiasts

tended to be more loyal to clothing makers who sold their gear at

specialty shops, Case said.

Nevertheless, she believes the ability to buy surf wear online

changed the perception that surf wear sold only at a surf shop has

more credibility than clothing available elsewhere.

“I don’t think it matters that Volcom is not only being sold at

Jack’s [Surfboards],” Case said.