Shares of Costa Mesa-based clothing maker Volcom Inc. closed down Tuesday after an analyst downgraded the stock and warned that Wall Street’s expectations for 2009 are overly optimistic.
Volcom shares closed down 6% on a market value of $228 million.
“We are increasingly concerned about the near-term outlook for fundamentals at the company,” wrote Brandon Ferro of KeyBanc Capital Markets, part of Cleveland-based KeyCorp.
The investment bank changed its rating on Volcom from “buy” to “hold.”
“Our concerns span the company’s entire business,” Ferro wrote.
Volcom makes clothes inspired by surfing, skateboarding and music. Like other clothing makers, it’s dealing with the worst retail downturn in recent memory.
The company could see weak summer orders from retailers, according to Ferro. Some retailers could skip early buying altogether and just order on the spot during the summer months, he said.
Struggling Anaheim-based Pacific Sunwear of California Inc. is another factor, Ferro said. The mall retailer makes up 15% of Volcom’s revenue and has been struggling with declining sales and heavy discounting.
Volcom also stands to see lower than expected sales in Europe, where the company made a big push in 2007 by taking over sales of its clothes from companies that had licensed the Volcom brand.
Ferro called Wall Street’s average $33 million profit estimate for 2009 “too high.”
The analyst drastically cut his own 2009 profit forecast for Volcom from $34 million to $27 million.
For 2008, Ferro said he expects Volcom to report a profit of $34.4 million, down from an earlier forecast of $35 million.
Analysts on average expect Volcom to see a profit of $34.6 million when the company reports 2008 results in coming weeks.
2008 sales are seen coming in at $334 million, up 25% from 2007.
