Shares of Costa Mesa-based Volcom Inc. sunk more than 12% in late day New York trading on Friday after the clothing designer reported lower quarterly earnings and said earnings for the current quarter could be less than expected.
For the third quarter, Volcom said it expects profits of $12.9 million to $13.4 million. Wall Street had been expecting profits of $15 million.
Volcom said it expects sales of $89 million to $91 million for the current quarter, below analysts’ $92 million.
The company has a market value of about $940 million.
Volcom is being hit by rising costs. For the second quarter, the company reported net income of $6.2 million, down 5% from a year earlier.
Selling, general and administrative expenses rose more than 40% in the quarter.
Second-quarter sales were $58 million, up 27% from a year earlier.
The company’s costs are rising as Volcom builds a European headquarters in France to take over distribution of its clothes on the continent, which before was done by licensees.
The 34,000-square-foot office and warehouse in Anglet,part of France’s southwest surfing hub near the Spain border,should be open early next year.
Europe is Volcom’s “biggest opportunity,” said Jeff Mintz, an analyst at Wedbush Morgan Securities Inc.
Volcom doesn’t expect a boost from Europe until the second half of next year. The company has warned Wall Street to expect higher expenses as it builds its operations there.
