As goes Pacific Sunwear of Anaheim Inc., so goes Volcom Inc.
The Costa Mesa-based clothing designer said it saw sales to stores run by Anaheim-based Pacific Sunwear fall 27% to $10.4 million in the fourth quarter.
The drop led to flat overall sales of $69.6 million for the quarter, which Volcom reported on Thursday.
Pacific Sunwear was Volcom’s largest source of sales at 15% during the quarter.
Volcom, which designs clothes inspired by surfing, skateboarding and music, has been working to lessen its dependence on Pacific Sunwear, which is slumping amid the worst retail downturn in recent memory.
Pacific Sunwear’s own declining sales are helping Volcom cut its dependency on the retailer, which runs about 900 mall stores selling surf-inspired clothing.
But ties may be lessening more than Volcom might like. Sales to Volcom’s next four largest retailers fell by 11% in the quarter, the company said.
For 2009, Volcom sees its business with Pacific Sunwear shrinking even further, after what it called an “anomaly” rise in first-quarter sales to the retailer.
Shares of Volcom were down about 9% in midday New York trading Friday, a day after the company reported mixed fourth-quarter results and warned of a deep profit shortfall for the current quarter.
Volcom has a market value of about $190 million.
The company projected a first-quarter profit of $3.1 million to $3.9 million for the current quarter, well below the $6.3 million analysts had been forecasting.
Sales are seen coming in at $62 million to $65 million, versus the $75.4 million Wall Street had been expecting on average.
The company also said it wouldn’t be providing a full-year forecast for 2009 “until such time when it has better clarity into its business.”
The drastically lower first-quarter outlook is a sign of weak early spring orders, analyst Mitch Kummetz of Robert W. Baird & Co. said in a report.
Volcom also saw fewer orders in the fourth quarter as retailers cut orders, he said. On top of that, few retailers are reordering Volcom products, according to Kummetz.
Still, he called the company’s outlook “fairly conservative.”
Results for the fourth quarter were mixed.
Sales came in flat from a year earlier at $69.6 million and just ahead of the $68.5 million analysts had expected.
Sales in the U.S., Canada and Japan were down 7% from a year earlier. Sales in Europe, where Volcom has made a big push in recent years, were up 7% to $10.9 million.
The company’s adjusted net income was $3.3 million, down 57% from a year earlier.
Wall Street on average had expected $3.9 million in profits, though Volcom’s earnings were just shy of the low end of expectations.
The company said it has cut jobs, salaries and other spending to deal with the downturn.
