Volcom/Electric’s 2014 and First Quarter 2015 Results; Plus Some Interesting Market Data

Kering, as you know, owns Volcom and Electric. Because the two brands represent a very small piece of Kering’s annual revenue, we don’t get much information on them. But I’ll give you what we’ve got and I also want to point you to some market data Kering provides in one of its documents.

Let’s start with the whole 2014 year. Kering’s 2014 revenues were EUR 10.038 billion. 68% of that revenue came from its luxury division with brands like Gucci. The remaining 32% is from its sports and lifestyle division (S & L) which includes Puma as well as Volcom and Electric.

Of total S & L revenue of EUR 3.245 billion, Puma accounted for EUR 2.990 billion, or 92% of the total. Volcom and Electric’s combined 2014 revenue was EUR 255 million and they earned an operating profit of EUR 10 million, or 3.92% of revenue. We aren’t told what the bottom line net income or loss after any allocations and taxes might be, and that’s normal. In the prior year, Volcom/Electric had revenue of EUR 245 million and an operating profit of EUR 9 million.

I want to share with you a document on Kering’s web site and some data it includes. If you go to this link, you’ll see a list of documents. Currently, the sixth one down in the list is the 2014 Reference Document. It has all sorts of information on Kering and its brands, and you can download it as a PDF.

Pages 44 through 46 is their Worldwide Sports & Lifestyle Market Overview. It contains some data on that market from a 2013 study conducted by NPD.   Let’s see if I can give you a link to their web site.  Here it is, I think. I get asked for solid market data pretty often and don’t usually have it. So you might check out the Kering’s market overview and see what NPD has to offer. I don’t know anything about NPD, and am just supplying you with the link.

Back to Kering’s 2014 Reference Document. Pages 54 and 55 provide a narrative of what went on at Volcom and Electric in 2014. Here’s part of what they say about Volcom.

“2014 was another difficult year for the action sports industry, however for Volcom it was an inflection point. Efforts made around the strengthening of products and marketing, adding top talent across the company, and implementing a global organization structure has led to improved revenue momentum in all regions. Volcom has experienced positive sell-through in wholesale distribution and has continued to gain market share in core retail accounts. Volcom also drove significant operational improvements through streamlining business operations, implementing a PLM (Product Lifecycle Management) system, and tightening SKU counts to improve product performance. Volcom expanded the reach of its e-commerce platform by launching sites in Europe and Australia. Branded retail was also a key focus for Volcom, with five net store openings particularly in France and the United States during the year.”

Talking about Electric, here’s what they say about the competitive environment.

“Competition in the action sports eyewear market (the main category at Electric) is characterized by two main ideas. First, both young and established endemic action Sport competitors are vying for a decreasing retail footprint of core shops along with non-endemic global brands. Second, many of the brands that are entering the market target lower margins and price points.”

It’s not like we didn’t know that, but it’s kind of sobering to see it acknowledged like that. I suggest you go read the full discussion for both brands. It’s not very long.

We aren’t given much on the first quarter either in the press release or conference call. Volcom and Electric were down 5%.  This was due to “weakness across certain U.S. wholesale accounts” as well as some delivery issues. I think, but am not sure, they are referring to the West Coast port slowdown.

That’s it. Hope you go take a look at the Reference Document.