Kering tells us Almost Nothing about Volcom’s Results

Kering reported its earnings for the September 30 quarter last week. We learned very little about Volcom and Electric. It’s like trying to find out what’s going on with Ride when we review Jarden’s financials or Reef when we look at VF’s. They just aren’t big enough to require much disclosure. What I do believe is when there’s good news, more time is spent on the smaller brand’s results. To me, the lack of information speaks volumes. Let’s see what we can find out.

Remember that Kering (then PPR) announced the acquisition of Volcom back in May 2011 and paid $608 million. The last time Volcom, as a public company, reported a quarter ended September 30 it was in 2010. Their revenue in that quarter was $105 million. 
Volcom is part of Kering’s Sports & Lifestyle Division. That division includes, in addition to Volcom, Puma, Cobra, Tretorn and Electric (acquired with Volcom). That entire division reported revenue of 896 million Euros for the quarter. (If we use the exchange rate at September 30 2013, that’s about $1.21 billion). But Puma represented 825 million Euros, or 92% of the total. So, according to my careful calculations, Volcom, Electric, Tretorn and Cobra together for the quarter had revenue of 71 million Euros. That’s $96 million at the September 30 exchange rate.  That represents a decline of 7.9% from 77.5 million Euros in the same quarter last year for the entire division. 
So what do we know?  We know that Volcom, Electric, Cobra and Tretorn together had about $9 million less in revenue than Volcom (including electric) reported during the quarter than ended September 30, 2010.   I have no idea what revenues Tretorn and Cobra had and whether those revenues grew or shrank. Do your own guessing, but by way of example, let’s say they are just $5 million each during the quarter.  That would leave Volcom and Electric combined at $86 million. 
We are told in the conference call that Volcom’s revenues were up 2% compared to the same quarter last year so that suggests that Cobra and Tretorn were down. 2% if probably not quite the kind of growth Kering had in mind when they spent $608 million. Kering says Volcom benefitted from the introduction of shoes and “resilience” in apparel. Its sales were “solid” in the North American market. Electric, they say, is “refocusing” on accessories and that impacted its results. Resilience and refocusing are the kinds of words you use when things aren’t going all that well, though how a 2% increase represents resilience beats the hell out of me. 
I don’t know if Volcom’s 2% growth includes Electric or not. I think not, but remember that the $102 million Volcom reported in its last September 30 quarter before being acquired does. 
When Volcom was acquired I wrote an article that congratulated Richard Woolcott and the Volcom board of directors for selling at the right time and for the right reasons. There’s a lesson there for anybody building a company, and at least one of you is now going to get a call from me this week suggesting it’s time to sell. 
The Kering press release does not even include complete financial statements, and many of the numbers are adjusted to reflect a “constant group structure and exchange rates.”   It’s bad enough that in the U.S. they do the conference call before the analysts really have time to analyze the press release and before they see the 10Q. That Kering can get away with doing it before they’ve released complete financial statements at all just amazes me. You won’t be surprised to learn that most of the questions are “strategic,” which in this case means there’s not much else you can ask about. I have no idea why the analysts tolerate it. Conference calls are starting to feel like Kabuki theater. 
It looks like Volcom (including Electric) isn’t doing very well based on the few numbers we are provided. Interesting that nobody else has even raised the issue. Certainly they are nowhere near performing up to expectations at the time they were acquired. What happened? Don’t know. I imagine that Kering’s expectations didn’t help things. But I also think, as I wrote at the time, that Volcom had gone a long way towards filling the niche they had positioned themselves in, and growing beyond that has proven difficult.



11 replies
  1. Bob Hall
    Bob Hall says:

    Great example of selling “just before midnight”…and letting the buyer believe what they wanted about future expectations. This is the stuff that future “spinoffs” are made of!

  2. L
    L says:

    Sometimes an iceberg is hidden below until u crash into it.
    Rumor is employees are furloughed for the holidays.
    Time always makes things clearer…

    • jeff
      jeff says:

      Hi L,
      This was kind of hidden in plain sight. I am completely flummoxed by the fact that analysts don’t ask about things sitting right in front of their face, and that nobody in our industry seems to think it’s worthy of a mention. I haven’t seen any talk about last week’s layoffs at Ride either. Must come under the heading of “If we ignore it, maybe it will go away.”

      Thanks for the comment.


    • jeff
      jeff says:

      Hi GB,

      I think there’s a certain level of inevitable transition that occurs when a giant, multinational company with a different culture buys a smaller company and has big expectations for it. People can leave because they don’t like the new culture, because they figure their job is done, because they know they will never meet the acquirer’s expectations, because they have all the money they need, or for a combination of all those. I would note in his announcement he was leaving, Tom said note a word about Kering.


  3. stikman
    stikman says:

    Jeff, can you check the link to the article you wrote when Volcom was sold? it seems to be dead? thanks

  4. markfitzy
    markfitzy says:

    Spot on, as usual, Jeff. Let’s sit back and recall what became of OP, Mossimo, Gotcha and countless other surf/skate/snow/lifestyle brands. Volcom broke the mold when they went public and the players cashed out in the biggest possible way. Won’t be likely again any time soon.

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