Volcom Inc. Q3 2009 Earnings Conference Call

Oct.30.09 | About: Volcom, Inc. (VLCM)

Volcom Inc. (NASDAQ:VLCM)

Q3 2009 Earnings Call

October 29, 2009 16:30 p.m. ET

Executives

Hoby Darling - SVP of Strategic Development, General Counsel

Richard Woolcott - Chairman and CEO

Doug Collier - CFO

Jason Steris - President and COO

Analysts

Mitch Kummetz - Robert W. Baird

Sean Martin - Piper Jaffray

Jeff Van Sinderen - B. Riley

Edward Yruma - Keybanc

Christine Chen - Needham & Company

Ronald Bookbinder - Global Hunter

Presentation

Operator

Good afternoon. My name is Tameka and I'll be your conference operator today. At this time, I would like to welcome everyone to the Volcom's third quarter 2009 conference call. All lines have been placed on mute to prevent any background noise. After the speakers remark, there will be a question and answer session. (Operator Instructions).

I would now like to introduce Mr. Hoby Darling, Vice President of Strategic Development and General Counsel for Volcom Inc. [To begin] the call. Please go ahead Mr. Darling.

Hoby Darling

Thanks Tameka. Good afternoon everyone and thank you for joining us today to discuss Volcom's 2009 third quarter financial results. Joining me on the call today are Richard Woolcott, Volcom's Chairman and Chief Executive Officer; Jason Steris, Volcom's President and Chief Operating Officer; and Doug Collier, Volcom's Chief Financial Officer.

First some housekeeping items before we start. If you would like to be added to Volcom's email distribution list to receive company information or if you'd like to change your contact information, please contact Evan Pondel at Pondel Wilkinson at 310-279-5973.

In addition, please be advised that this conference call is being broadcast live on the internet at volcom.com, as well as earnings.com. A playback of this call will be available for one year and may be accessed on the Internet at both sites.

Please note that all the information discussed on today’s call is covered under the Safe Harbor provisions of the Litigation Reform Act. The company’s discussion today will include forward-looking information reflecting management’s current forecast of certain aspects of the company's future. In particular, statements about the future regarding our guidance, outlook for future business margins, financial performance, customer demand, growth and profitability all constitute forward-looking statements.

These forward-looking statements are based on management's current expectations but they involve number of risks and uncertainties. Actual results could differ materially from those stated or implied by these forward-looking statements. Certain risk factors associated with Volcom’s business are set forth in 10-K, and subsequent filed reports on Form 10-Q.

The company disclaims any intent or obligation to update these forward-looking statements except as required by law. All forward-looking statements from today’s call are qualified in their entirety by the foregoing cautionary statements.

With that said, its my pleasure to turn the call over to Richard Woolcott, our Chairman and CEO. Richard?

Richard Woolcott

Alright, well, thank you, Hoby, and good afternoon everyone. As we near the end of 2009 I am gratified to report that Volcom has successfully weathered the economic storm thus far and we believe that the skies are beginning to clear. The dramatic environment over the past year called for its full review and analysis of every aspect of our business. And we took decisive actions to realign activities within our organization in order to emerge even stronger when the time came to build back. We believe our better than expected third quarter results, across all our business channels demonstrate the beginning of the shift in the consumer's mentality, as well as that of our retailers, and is a reflection of our focus and determination to get through this tough period.

But economic conditions are still uncertain, and our industry is not out of the woods yet. However, after attending recent trade shows and visiting with many core and specially retailers this fall. I believe the tone is definitely gaining some positive momentum. From our prospective, we are now in a build back mode and ready to capitalize on pen-up consumer demands.

Our goal is to harness the shifting attitude and maintain a competitive edge that this new environment demands.

Now looking towards 2010, I believe we are positioned to take market share and it’s exciting to see all of our efforts coming together.

At the core of our success, is the strength of the Volcom brand, something that we never take for granted and constantly nurture. Just recently, we were once again named the number one brand in action sports among teens in the most recent Piper Jaffray report. We also were ranked the number one men’s and women’s apparel brand in the August 25 [fair] report. And the number one men’s and women’s street wear brand in the most recent SPC business magazines representing Canada.

Despite a general feeling that things are looking a bit brighter, it is imperative that we stick to our fundamentals and make sure our product is absolutely the best it can be, that we support our retailers in every way that we can, and that our marketing and advertising efforts continue to generate excitement for the staff.

In recent calls we have talked about our design focus on certain categories, such as boardshorts, denim and outerwear. We now believe we have captured market share in all three of these categories and rank among the best compared with our competition.

We also have retooled our advertising campaigns to further distinguish these product categories and drive enthusiasm. The proving grounds campaign highlighted boardshorts and Creedlers and road tested denims focused on our long run prominence in the denim category. This was a fundamental shift for us in the past year and is proving to be highly effective and helping us further connect with our audience.

Now, when looking at the importance of product segmentation our Stone Age program has helped to further differentiate Volcom. And is only found to influence your core retailers. This helps our retailers because it is exclusive to them providing a point of differentiation from other larger retailers that they may compete with. The program is gaining momentum and helping to drive traffic toward our independent shops.

In terms of our outerwear one very exciting part of our new collection is our exclusive Gore-Tex Thermal Defense System. TDS is a layering system build into the garments that creates maximum breath ability and insulation through strategic three layer construction.

I wrote in this outerwear or last winner and it was hands down the best product I have ever worn while snow boarding. For more info on the Gore-Tex TDS products please visit our website at www.volcom.com. These initiatives have helped to further refined our brand message and distinguish Volcom from the pack.

As well, we have all of our team rider programs contents, art initiatives, music and films that reflect who we are? What we stand for? And where we are going? Let me now spend a moment talking about our distribution. At the core level, we have seen several months now of relative stability, while revenues derived from the core level is still down year-to-date, they don’t appear to be deteriorating further and are actually beginning to show some signs of recovery.

For men and boys, business began picking up in early July with better weather. While as well Southern California seemed to lag behind a bit as a whole postal accounts generally faired better than inland and mall accounts. Sport shorts, rock shorts denim Flannel, crew and tank nets and T’s all drove business. Inventory levels also were getting in line, and a lot of the retailers were beginning to chase business towards the end of the back-to-school season.

Overall September was a good month particularly with labor day week end providing some decent traffic. The juniors business wasn’t as strong as men’s and boys, however accessories were the bright spot, specifically with bags packs wallets and scarves driving sales. Overall the juniors business was tough with competition from the vertical fast fashion, price point driven retailers, but we are working hard to fine tune our product mix in developing more compelling marketing strategies that we believe will increase awareness and demand. It’s all about getting those juniors customer excited about branded products and giving her a reason to pay a little bit extra for that magic.

Outside of the core, our relationships remain strong with specialty retailers and department stores. Everyone is working to sustain their footing in this new environment and we are doing everything that we can to support their changing initiatives as long as it also reinforces our own brand philosophy and growth objectives.

There are ample amount of opportunities across few channels and we are constantly fine tuning our products and helping our retail partners with everything from in-store presentations and merchandising to providing special promotional opportunities to help drive sales.

Now that you have a sense of what we are experiencing domestically, let’s focus on Europe for a bit, the environment overall is essentially inline with what we are seeing in the US. Some countries fairing a bit better than others. Germany, Austria and France were the strongest, while consumer confidence was down in the UK, Ireland and Spain.

The worst period of core account closures and cancellation seems to be over. And those businesses that were going to close seem to have already done so. Now, on the flip side, financially strong accounts are beginning to open new doors taking advantage of the cheaper rent structures.

In our core distribution in Europe for Q3, Volcom was one of the three selling brands the T-shirts, fleece, jackets and sweaters leading the charge. Back-to-school business was solid and we are one of the first brands to sell through opening up rooms for more reorder business.

We also delivered [snow] in August and September, and immediately started to see positive sales momentum especially in fleece. In general looking ahead in Europe people seemed to be optimistic about the slow recovery in 2010. For Volcom, several opportunities have emerged as a result of the changes in the market place, including the ability to potentially open up more doors with the existing accounts. As well as establishing relationships with new accounts. We've explored the shop and shop concepts and this too looks like potentially viable model in certain areas. And finally, like in the US Stone Age may offer a lot of potential as a powerful marketing tool in Europe.

Let's now talk briefly about the Asia Pacific region. Our company continues to work diligently with our team in Japan, and we are starting to make good progress. We have implemented a new ERP system and installed an experienced management team. We have also seen an increase in revenue with better margins since taking over the territory.

As we begin to fine tune the operation, we plan to put more focus on the fundamentals including marketing, in-store merchandising, retailer relationships and sales strategies. We also are very focused in making sure putting the right product assortments in the market at the right time.

Even though the region has been hit by the global slowdown, we still believe there are opportunities for Volcom to gain market share in the future. And the same goes for our licensee in Australia where we also have quite a bit of opportunity.

Our efforts as off late have been in making sure that we have a well balanced collection for each season supported by the right marketing mix. Economic [woes] weren’t felt nearly as badly as they were in the stakes and our teams down under are working hard on all aspects of the business in order to gain more market share while increasing our overall in store brand presence.

Thus far, Volcom is gaining strength in the market and position correctly as we head into 2010. Action sports is also thriving in Latin America, and we are seeing continued interest throughout the region. We expect more activity in this part of the world in the future.

I'd now like to provide an update on Electric. There is a lot of positive momentum for Electric as the company continues to rank strongly with as compared to the competition.

In the most recent (inaudible) reports Electric was ranked the number one sunglass brand in their core channels of distributions. I am also proud to announce that Electric won the SIMA Image Award for the accessory product of the year with the iPhone Electric app. These results reinforced the potential for the brand especially when the sunglass market turns around.

Q3 was a strong quarter for Electric. As the company diversified its revenue mix with the shipment of its small 2009 goggle line. Goggle season is in full swing and Electric has already shipped the majority of its pre-booked orders to the retailers. An opportunity that we saw when joining forces with Electric was in their soft good brands. This has been expanded and is now on the right calendar. Caps, fleece, men's t-shirts, bags and luggage are doing well and the plan is to go deeper in these categories in the future. We are also increasing our display presence throughout the US with some of our national accounts as well as broadening our distribution with snow resort and more higher-end sporting good locations.

As the economy gets stronger, we expect Electric's performance to improve. We work closely with the Electric team to streamline the business. And are collectively devoted to driving revenue growth in the year's ahead.

At the end of the day, the proof of our success will be in the performance of our company. Volcom has managed to maintain its brand's strength at the time when many companies have struggled. We believe that's because of our management team and employee's, passion, focus and commitment to succeed. As we say that the first time that the changing tide in the business environment, we are not diverting from our plans. We intend to keep expenses in check, execute effective marketing campaigns, maintain a health balance sheet and innovate and create that magic that makes our product unique and our brand a leader in action sports.

As always, I’d like to thank the entire Volcom family, our team riders, retailers and shareholders for their continued support and commitment.

With that, I’d like to now turn the call over to Doug to review our financial results for the third quarter. Doug.

Doug Collier

Thanks Richard and good afternoon everyone. Our 2009 third quarter results exceeded our expectations, primarily driven by revenue that was above plan in all three of our business segments. Increased demand for our products, improved efficiencies and the delivery of our snow gear and better than projected FX rate led to consolidated revenue that was about $9 million better than the high end of our revenue guidance provided on our last earnings call.

Also in our US and Electric segments gross margins improved over Q3 of last year. We believe this increase in gross margin indicates that our strategy to hold price and compete on branded product has been effective for Volcom and Electric.

We also believe the improved gross margins indicate that the general retail environment is now less promotional than in previous periods. Retailers now seem to have lower inventory levels, as compared to the latter part of last year, when excess inventory led to widespread promotional liquidation sales.

Another highlight of the quarter was the continued success of our international diversification strategy. Our European segment when measured in constant dollars had revenue growth of 9% in Q3 despite the challenging retail environment across the continent. Additionally, we have increased our international footprint with the recent brand control initiatives in Japan and the UK, and we continued to work closely with our international licensees.

We believe international will continue to provide significant growth opportunities for the brand moving forward. While we did not believe we are out of the woods with regard to the economy and the consumer. We are cautiously optimistic as we look forward. As the retail environment stabilizes, we believe Volcom is uniquely positioned to take advantage of the significant opportunities that will arise.

First and foremost we have the iconic Stone logo and the Volcom brand, which has an authentic emotional connection to its customers worldwide. Second, we produce category leading high quality innovative product. Third, we are armed with a rock solid balance sheet, plus with over 99 million in cash and short term investments. And we have no long term debt.

Lastly, we have a long term vision and are executing a strategic plan that we believe will increase market share, build earnings and increase long term shareholder value.

I’ll now review some of the financial results for the third quarter ended September 30, 2009. Total consolidated revenue decreased 16% to $93.9 million, compared with $111.7 million in the third quarter of 2008.

Let me now break down our third quarter revenue by each of our three business segments. The US, Europe and Electric. First let’s look at the US segment which includes revenue from the US, Canada, Japan and most other international territories outside Europe, as well as our domestic Volcom branded retail and LSNS retail stores.

Total revenue from our US segment including royalties for the third quarter, decreased 22% to 56.8 million, compared with 72.8 million in Q3 of 2008. Revenue for this quarter exceeded our previous guidance of 51 million to 54 million, due primarily to better than projected demand for Volcom products.

A breakdown of the US segment product revenue in Q3 by category is as follows: Our men’s product revenue decreased 19% to 24.5 million for Q3, compared with 30.2 million in the third quarter of 2008. Our girls product revenue decreased 46% to 10.9 million versus 20 million in the third quarter of last year.

The Juniors market continues to be challenging with competition from vertical, fast fashion retailers and a customer that continues to be price sensitive. Girls is an important category for Volcom and we are currently working with our entire girls team along with our key retailers to strategize ways to increase this business.

Snow revenue decreased 3% to $15.5 million, compared with $15.9 million last year. Snow was a strong category this year both in the US and Europe. On a consolidated basis, snow revenue has slightly increased in 2009. We have seen immediate sell through on snow specific Hydro Fleece, and on our high end pattern pending, core tax thermal defense system outwear which contains our Zip-Tech jacket connection technology.

We believe Snow is a category that demonstrates our commitment to cutting edge technology and performance driven product. Boys revenue which include our kids line decreased 6% to $4.7 million, compared with $5 million in the third quarter of 2008.

Revenue from our Creedlers footwear line was a $136,000 versus $316,000 in Q3 of last year. Revenue from our girls swim line was $65,000 versus $71,000 in Q3 last year. International product revenue which is reported as part of our U.S. segment and consists primarily of sales in Canada and Japan and does not include licensing revenue with $18.2 million or 32% of our US segment product revenue for the quarter. Compared with $14.5 million or 20% for the comparable period in 2008.

This increase was primarily due to incremental revenue in Japan, as a result of the acquisition of the Volcom distributor in Japan in Q4 of last year.

Looking at our revenue by distribution channel, revenue from our five largest accounts decreased 53% to 14.4 million in the 2009 third quarter, representing 26% of US segment product sales. In Q3 of 2008, revenue from our five largest accounts was 30.8 million and represented 43% of US segment product sales.

Revenue from PacSun, our largest customer decreased 65% to 6.6 million for the quarter or 12% of US segment product revenue. Last year revenue from PacSun was 18.8 million or 26% of our US segment product revenue. This decrease was in our plan and reflected in our guidance. Our PacSun business for the first nine months of the year was down approximately 42%.

Volcom continues to sell well for PacSun and hold its position as a top brand. Also we have met extensively with the PacSun team and their new CEO, Gary Schoenfeld. We are excited about the directions that we understand that Gary is taking the company.

Excluding PacSun, revenue from our next four largest accounts decreased 35% for the quarter. We continue to see changes in how our major accounts are positioning themselves in this new environment. Additionally our girls business has been difficult with some of our larger accounts.

With that said, we can sell through reports and surveys indicate that Volcom is an important brand for these accounts and we see an opportunity to increase this business moving forward.

We are currently executing initiatives to maximize our business in the new environment with these accounts. This includes driving demand for Volcom product through the more nationally targeted advertising and marketing programs. Also we will continue to work with these accounts to present the right product selection at the appropriate price point with [grate] in to our merchandising.

In Q3 revenue from accounts outside our five largest accounts which represented 74% of total US segment product revenue for the quarter increased 1% to 41.8 million. In the third quarter of 2008, revenue from the same group was 41.4 million representing 57% of total US segment product revenue. Excluding the incremental revenue from our Japanese operation, revenue from these accounts decreased about 9%.

We are encouraged to see business outside of our five largest accounts beginning to stabilize. This group of retailers includes independent core stores that are geographically diverse and tend to cater to influential customers. Even more importantly these retailers were the backbone of action sports, and we believe the success in this distribution speaks to the offence as the incredibility of the Volcom brand as well as the continued relevance of actions sports over all.

Now let's look at revenue from the Europe segment. Revenue from Europe was 30.2 million in the third quarter of 2009, compared with 31 million in the third quarter of 2008. In constant dollars, revenue increased 9% for the quarter, the revenue increase over our previous guidance of 25 million primarily reflected about three million in earlier than planned shipments of snow product. And approximately two million to better than projected FX rates for the translation of European revenue to US dollars.

In addition to the increasing excellence in the quality and design our snow products we have further improved our manufacturing capabilities. This has allowed us to be one of the first brands available at retail and solidified Volcom as a leading snow outerwear brand.

In Q3, revenue by category in Europe is as follows: men's decreased 2% to 15.6 million compared with 16 million in Q3 of 2008. Girl's decreased 13% to 5.7 million, compared with 6.5 last year. Our snow business which I just discussed increased 10% to $7.7 million, compared with $7 million in Q3 of 2008. Boys was $927,000, compared with $914,000 last year. Footwear was a $101,000 versus $121,000 last year.

Finally revenue from our third business segment Electric decreased 12% to $6.9 million for the 2009 third quarter compared with $7.8 million in Q3 of 2008.

Turning to the gross margin on a consolidated basis, Q3 gross profit as a percentage of total revenue was 51.6%, compared with 49.4% in the same period in 2008. In our US segment, Q3 gross margin on product it was 49.4%, compared with 45.8% in Q3 of 2008.

The increase primarily reflects better inventory management and a more limited discounting environment for Volcom product. Also, we have increased our gross margin in our Japan business due to the acquisition of the Volcom distributor in Q4 of last year.

In our Europe segment gross margin was 52.9%, versus 55.3% last year. This decrease primarily reflects a less favorable foreign exchange rate, compared to last year. More shipments of slightly lower margin snow outerwear, and more shipments of samples than in Q3 of last year.

Gross margin in the Electric segment grew to 59.7%, compared with 56.3% in Q3 of 2008. This increase primarily reflects greater sales of higher margin goggles and sunglasses that were purchased at a more favorable exchange rate than last year. We are excited to see the strength of Electric’s gross margin and the contribution that eyewear can make to Volcom’s overall consolidated gross margin, even in a difficult retail environment.

Selling, general and administrative expenses on a consolidated basis were 28.8 million in the third quarter of 2009, versus 30.3 million for the same period in 2008. As a percentage of sales consolidated SG&A expenses were approximately 30.7% of total revenue for the third quarter of 2009, compared with 27.1% for the same period last year.

For the US segment total SG&A expenses decreased slightly to 19.3 million, compared with 19.6 million in Q3 of last year. This decrease was the result of expense reductions offset by incremental expenses associated with the acquisition of our Japanese operations and two additional Volcom retail stores.

For the Europe segment SG&A expenses in Q3 decreased 6% to 6.3 million, compared with 6.7 million in Q3 of last year. On a constant dollar basis SG&A and Europe increased 4%. This slight increase is primarily due to expense cuts offset by incremental expenses associated with the UK subsidiary and the London retail store.

In our Electric segment, SG&A expenses decreased 3.2 million for the third quarter of 2009 compared with four million in the same period last year. Electric acquisition related amortization expense was 64,000 in Q3 of this year, compared to approximately 500,000 last year.

Consolidated operating income for the third quarter was 19.7 million, compared to 24.9 million in Q3 of 2008. This represents an operating margin of 20.9% in the most recent quarter versus 22.3% in the third quarter of 2008. US segment operating income for the third quarter was nine million versus 14.1 million last year primarily reflecting the lower level of revenue in the quarter.

Europe segment operating income for the third quarter was $9.7 million, compared with $10.4 million in the third quarter of 2008. Electric segment operating income in the third quarter was $910,000 compared with $384,000 last year.

On a consolidated basis, the company recorded a provision for income taxes for the third quarter using a 34% annual effective tax rate. Consolidated net income for the third quarter of 2009 was $13.2 million or $0.54 per diluted share, compared with consolidated net income of $16.3 million or $0.67 per diluted share in the third quarter of 2008.

Let me now take a minute to discuss the strength of Volcom’s balance sheet. At September 30, 2009, the company had approximately $99 million in cash and short term investments. As presented on the consolidated statement of cash flows, the company generated $3.1 million in cash from operations in the third quarter of 2009. In the first nine months of this year, we generated a total of $19.4 million in cash from operations.

We have no long term debt, stock holders equity of $216 million and a current ratio of about 7.5 to one. Consolidated accounts receivable decreased 14.2% to $69.8 million at the end of Q3, compared with $81.3 million at September 30, 2008. The consolidated accounts receivable balance at September 30, 2009, represents days sales outstanding of 88 days, compared with 84 days at the end of the third quarter of 2008.

Consolidated inventory decrease 13% to $22.4 million, compared to 25.8 million a year before. On a consolidated basis, the inventory return rate calculates to 5.8 times per year or once every 63 days. Inventory returns calculated to 7.6 times per year at the end of Q3 2008.

I'll now turn to our financial outlook. Consolidated 2009 fourth quarter revenue is expected to be between approximately 59 million and 64 million. A decrease of approximately 11% to 15% compare to the fourth quarter of 2008. This includes anticipated revenue of approximately 43 million to 46 million from the US segment approximately 11 million from our Europe segment and approximately five million from Electric.

Our revenue outlook for the fourth quarter from our largest customers PacSun has not changed. In Q4, we project revenue from PacSun to decrease approximately 43% to six million, compared with 10.4 million in Q4 of last year. Based on this our PacSun business is expected to be down approximately 42% for 2009 equaling annual revenue of about 30 million.

With regards to 2009 SG&A expenses in Q3, we implemented new programs related to advertising and marketing, in-store racks and displays, new personnel including a girl sales manager and an in-store merchandiser, and other improvements to our infrastructure. While these programs did result in additional expense, we think these programs and timely and will allow us to take advantage of opportunities that currently exist to gain market share. With these new programs in mind, we now project 2009 total consolidated SG&A to be slightly less than in 2008.

Consolidated EPS for Q4 of 2009 is anticipated to be approximately in the range of $0.01 to $0.04. We expect the Q4 tax rate to be approximately 34%. Fully diluted shares outstanding for the fourth quarter are expected to be approximately 24.4 million as a result of our current outlook for the fourth quarter 2009 full year consolidated revenue is projected between 275 million and 278 million. And EPS is projected in the range of $0.76 to $0.79.

And putting forth this outlook, we want to remind everyone of the complexity of accurately accessing future earnings and revenue growth, given the challenging economic and credit environment the difficulty in predicting sales of our products by key retailers including PacSun changes in fashion, trends and consumer preferences and sourcing cost.

As the current economic environment begins to stabilize Volcom with its world wide brand strength, quality product, enviable cash position and dedicated team of employees, athletes, sales reps and distributors around the globe is positioned to emerge with a distinct competitive advantage.

Now, we’ll open the call for questions.

Question-And-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Mitch Kummetz with Robert W. Baird.

Mitch Kummetz - Robert W. Baird

Yeah thanks and congratulations on the quarter. Got a few question, Doug may be just on the SG&A specifics and those comments you just made about SG&A being down slightly from 2008 it looks like nine months or may be a year, SG&A is down about 3.3 million I am not sure what slightly means I mean does that mean kind of flattish in the fourth quarter year-over-year or do you actually expect it to be up a little bit given some of those investments that you made recently?

Doug Collier

I think it’ll be up a little bit, try more like the Q1 of this year and I think slightly remain and you know probably be a couple of million below where we ended up last year.

Mitch Kummetz - Robert W. Baird

Okay. And then on the PacSun business I mean you came in right where you said you were on the quarter and your Q4 outlook really hasn’t changed. I know you are not only speaking to 2010 yet, but I am sure you have had some preliminary discussions with those guys if not further down the road with it. Tough comparison there on the first quarter. I mean you expect you are showing pretty big decreases through the last couple of quarters, and then its better in Q4. I mean do you expect that to kind of continue into the first quarter of next year before may be leveling off or how are you thinking about that?

Richard Woolcott

Hey Mitch, this is Richard here. Yeah we’ve had a number of meetings both with Gary and the buying teams and our teams internally here with their teams. And specifically looking at next year what type of initiatives we are going to roll out, what type of products we are going to focus on, so we are in that process right now. I think its too early to tell exactly how that’s all going to unfold, actually translate into actual orders for next year.

Our hope is that we can build, if we can build back that business and both teams are working on that initiative of okay, here is what we have set this year, we’ve set the bench at $30 million and let’s go after the business and try to build it back. I think on our next call we are going to have a much better idea of how that actually unfolds and when that kind of lands if it is in the first quarter, second quarter, back half. We don’t have that information yet. I think the one thing I can say is that the relationship and the communication no doubt is the strongest its ever been. I think that their direction with their focus back on brands lends itself very well from where Volcom’s is at, not only in the market place today, but as we move forward. So there’s positive momentum and again I think on the next call, we’ll really be able to see how that momentum actually unfolds in terms of building back our sales

Mitch Kummetz - Robert W. Baird

That’s helpful. And then may be a couple of other items. The snow business it was pretty good in the US it was down a little bit. And then in Europe it sounds like some business got moved forward out of Q4 into Q3, and then the weather seems to be cold out there and there has been some snow, long lead time business I am guessing you build your inventory to your pre-books is there any opportunity to chase that business between now and year end.

Jason Steris

Hey Mitch this is Jason here I’ll answer that one for you. You know that is the cut-to-order business for us and high ticket item well is a safe place to be and so I’d say no to that question and there is a couple of categories a little bit of fleece and might be a little available to sale but from the most part that’s all clean cut-to-order business and we pre-booked that stuff back in January and February.

Doug Collier

Yeah Mitch I think the opportunity there really is we haven’t talked about it too much, but we have done a lot of trade shows as we go into January, and so I think two things if we have got a strong snow season and fortunately we are starting actually there is a bunch of resorts here opening in Southern California this weekend and I think may be tomorrow to mountain high and so on so forth so if we can get snow season kicked in and the weather cooperates and we get some good sell through, its going to carry over to when we go to SIA and we break the line for January so that’s I think where the opportunity is for next season. So we are positioned right now and it looks like the weather is cooperating and we are back in our snow program with a lot of advertising out there and we have got actually a lot of presence in all the new snow movies with our team riders wearing the latest products, so there is a lot of momentum and we just got to keep our fingers crossed for the weather to corporate.

Jason Steris

And just to add to that Mitch, I’d say our products out there look better than they ever have the in-store presentation both on the men’s and the girls products looks really good we have been getting a lot of photos back from the shops and the florist and even it’s a little early signs of sell through and its been really positive our response. So, that kind of leads in the next year to just get momentum.

Mitch Kummetz - Robert W. Baird

That sounds good. And then spring orders I am guessing your order books are pretty much closed on spring. Can you share with us how those who have come in, are they up or they down or flattish?

Jason Steris

Hey Mitch Jason again. No, we are not really getting into next year. I can just tell you we had, in overall we had a really good response for other new products and the initiative that you have seen over this year of taken product in marketing, [timeless] together we sell it to boardshorts improving ground and what we have done with the denim and the Volcom brand jeans the road tested campaign and the products across the board at the last round of trade shows and through the booking process we saw that there was a lot of positive momentum and I think we have good categories were we can take some market share next year.

Some of our more strategic pricing initiatives that we have put in place, the girl’s swimwear lines, super positive results there. On the Creedlers line same thing I think as I was saying on the snow I pickup product right so that spring line is probably at the best its ever been across the board and we are in the summer now bookings and we have pre-booked majority of our spring but now you get into the season there is still bit of, there is some out launch business and we are still working with some of our bigger accounts to put that business together.

So, its not totally closed yet, but overall the feedbacks have been very positive on product end.

Mitch Kummetz - Robert W. Baird

Okay. Good to hear.

Richard Woolcott

I also think Mitch, that the holiday is are going to play a big role. As we go in January to those trade shows. if holiday unfolds in a positive way and there is a good demand out there we have got sell through. I think the retailers are going to go back and they are probably going to look at their inventories again going into next year. So, I mean that’s what we've got our eye on, we are comfortable with where we are at now but the upside could be I think the light is going to be on how holiday performs and that’s really going to help, give us an indication of how the year is going to unfold and also going into back-to-school as Jason said, we are going to go to this trade shows and its going to break fall in January, and its all going to be based around the mood of the retailer and the mood of holiday. If holiday was pretty good, I think they are going to be in better mood with their pre-books for back to school and probably looking at their inventories again and making sure they've got enough inventory if they don’t fill in. Now holidays not very good or just average, I think that sets kind of a different tone as we go into that tradeshow season in January.

Mitch Kummetz - Robert W. Baird

Got it. Okay.

Richard Woolcott

So, that’s what we've got our eye kind of on these next 60 to 90 days are very important, when you are talking about next year or thinking about next year. These 90 days are going to really set a president of how next year kind of starts to develop.

Mitch Kummetz - Robert W. Baird

Thanks guys. Good luck.

Operator

Your next question comes from the line of Sean Martin with Piper Jaffray.

Sean Martin - Piper Jaffray

Hi, thanks for taking my call. Quick question on the Winter Olympics. Is there anything you guys are doing specifically to potentially capitalize on some of the momentum that you have with this snow business in terms of sponsorship in the first part of next year? And should we look for some potential increase in marketing to capitalize on that next year.

Richard Woolcott

Hey Sean this is Richard here. I think that’s a great question. Well I think right now for us, and I've talk to our marketing teams about this. We are going to have our teams up there and working with our retailers make sure there is some type of promotions going on windows and that kind of stuff. But I think the big question from an athlete side is they haven’t picked the teams yet. So we are hoping I mean we have got good athletes in the US, we have got strong athletes in Europe, but we just, the next step is to get these guys on their representing their countries and they make their country's teams and then once that happens we’ll have a better idea of how Volcom is going to be represented up there, but initially we plan to be up there to supporting their athletes and being a part of kind of that energy up there but our first kind of vision is we got to get our guys on the US team and our girls on US team and the same goes with Europe too so that kind of our first kind of focus right now.

Sean Martin - Piper Jaffray

Sure and then I guess may be just a little more color on the US business obviously that looks like it was a little ahead of your initial guidance, is there anything in particular you know the girls business obviously looked a little lighter and then maybe you anticipated but are there specific categories that were coming in better than you expected and things that surprised during the quarter in terms of ordering.

Doug Collier

Yeah hey Sean this is Doug obviously we are well ahead of our guidance we saw it across the board, with our business here, our business in Japan, our retail stores did a little bit better obviously Electric was well ahead of guidance so its pretty much across the board where we saw better than expected business really encouraging to see in environment like this.

Jason Steris

Hey Sean this is Jason here. Just with our planning position with the outerwear this year and all that we are able to get outerwear out on the floor early and same thing with the Electric goggles and just get ready for that snow season which is kind of going back to the niches discussion I am just you know being the first guy down the floor with that snow product early really set that precedence for going into next year's bookings and that Q3 we are able to accomplish that and really get our snow products in both Volcom and Electric on the floor early, so it really helps out.

Sean Martin - Piper Jaffray

Got you. And then last two questions here, on Electric looks like you are projecting some pretty strong growth in the fourth quarter, just wondering what’s giving you some of that confidence? And then secondly may be Doug you can provide us on what you are thinking about in terms of an exchange rate for the fourth quarter on your business in terms of your guidance for Europe. Thanks.

Doug Collier

Yeah this is Doug. Yeah, the Electric business looks like its going to be better in Q4, than it was last year. With that said it was not the greatest Q4 ever and last year the environment was tough I think for all of the action sports and probably all of retail in general. We’ve just seen some real solid strength with that brand. That’s something we’ve always believed in. That we saw the real good gross margins, the contribution that that can make to the consolidated picture. So really encouraging and its not a big surprise to us from the reports we see on the brands including the ones you guys saw solid there.

Richard Woolcott

Hey Sean, just to jump in here on Electric too. I think one of the big things and we’ve been talking about and really focused on is the distribution opportunities that we’ve seen and I think now as you kind of see these numbers coming in from Electric that’s really a function of their sales team really diving in, rolling up the sleeves and going to that next level of like okay, lets make sure that we are really maximizing all the opportunities out there in this tougher environment. So I think as we move forward when we see the growth coming from Electric and like a big part of the distribution opportunity. And also the soft goods line there is a lot of focus on that and now its starting to actually kind of come to fruitation. So just a lot of effort that’s been put in the last 12 months and we are starting to see a pay off.

Sean Martin - Piper Jaffray

Okay and lastly are you thinking kind of where the euro is right now for your plan for Q4 Doug?

Doug Collier

Yeah it’s been a little volatile but we have adjusted that to our projections we had a big pick up obviously there was a bit of a surprise in Q3 but hopefully we were a little more accurate going into Q4.

Sean Martin - Piper Jaffray

Okay thanks, best of luck on the quarter guys.

Operator

Your next question comes from the line of Jeff Van Sinderen with B. Riley.

Jeff Van Sinderen - B. Riley

Good afternoon and congratulations on the quarter. I know you guys said the retail was up or was a little bit better than what you had expected for the quarter can you give us a little more detail on that may be in terms of what you say in your company owned stores and any retail metrics that are of comps same store sales transaction count AUR, UPT etcetera. And then also may be you can just talk about how that improved versus Q2 sequentially and how it was versus last year?

Richard Woolcott

Jeff are you talking Volcom retail stores?

Jeff Van Sinderen - B. Riley

Yeah exactly Volcom retail stores.

Richard Woolcott

I’ll give a little bit of color here and then may be Doug you want to back it up. Yeah I think that when we look at the performance from the stores, and I said this in past calls the stores that we have they are great they really help us as using them as an indicator to kind of see kind of the general getting a temperature read out there what’s happening at retail. And we have seen a pick up in that Q3 and I believe it’s a function of a couple of things. As like any retailer, we have really had to go in and make sure that we have got the best product assortment available for what the consumer is looking for right now. So we’ve had to fine tune that merchandising the product mix the way they we are advertising the stores just being a better retailer so I think that that’s part of the increase is due to us just doing a better job.

And the other part is just its starting to warm up out there in terms of the consumer getting back out and shopping a little bit more. It kind of show as we talk about little back-to-school. It shows that the consumer got out there and did some back-to-school shopping may be a little bit more than we had anticipated. So, I think its really on a big picture, its an indication that, that the time is changing and things are starting to get a little bit better out and there is just more of positive mood, and that’s when we see that in our stores, it makes us, its another kind of it reinforces the change in the environment of that.

Okay, it is starting to get a little bit better. We have a direct kind of measurement of that through Volcom stores. And Jeff as you know, the retail isn’t a huge part of our business. We got it [lend] Volcom stores [QLR, SNS] stores. So, just to see that come in a little bit better than our what we had projected is really encouraging. We kind of saw that across all of our businesses, just to see the business be better a little more demand out there is really good news for us. Specially when it’s related to Volcom products.

Jeff Van Sinderen - B. Riley

Okay, good. And then can you also update us on what you are seeing in terms of I think you just briefly mentioned this but what you are seeing in terms of concentration of price points in your sales roll over that you are seeing, higher concentration of all time price point product. Did you see that in Q3 and then also may be you can just speak to that in pre-book which I think you alluded to?

Jason Steris

Sure, Jeff. This is Jason. I’ll take that one we are talking little about having a little slightly more aggressive price point for some of our key categories moving forward and not mainly in the spring line for next. But we started participating in a couple of categories back-to-school and one example would be the denim where we had a $50 jean called the (Inaudible) and we got that out probably around June, July and we saw great success on that and we’ve just continued to develop on top of that add new washes and had a couple of new fits and we've seen that kind of going into holiday and as well in the spring where we see the little bit more strategic pricing there just to kind of help us take some market share and some of the categories where we just have not participated in the past and you'll see that across the board when most of our categories move into next year. So overall the response has been really positive for that and we'll get into it little bit more on the next call and we talk about next year, but so far we are stopped on what we've got there.

Jeff Van Sinderen - B. Riley

Okay, great. And then just relevant to your guidance. How much does your guidance for Q4 factor in for at once orders? And then I guess when you look at your bookings for spring if you maybe you don’t want to talk about that at all, but do you think that retailers are still planning to do more at once business? Or how should we think about pre books versus out once? And how those order trends are evolving?

Richard Woolcott

Hey Jeff, this is Richard here. I'll start with Q4. In the guidance that we have put out there, we do have some reorder business or some out launch or open order business built into that. And we've actually had a lot of conversations in the last couple of days about as we approach the end of the year, we've got about 60 days left in speaking with our sales managers and our sales our sales reps. We feel comfortable with what our guidance is, we feel comfortable with the amount of inventories that we have out there on the floor. In general I think that inventory levels for our retailers they are probably comfortable with them. So, I think everybody is strategically set going into these last 60 days and the question would come up, well, hey do you see any big changes, could something different happen out there? And I think right now unless there is a big change in the demand in terms of just a big surge in holiday business, I think we are pretty well set. And again I mean these next 60 days are really important not only for the holiday business, but as we go into next year and specially as we go to the trade show season and we are breaking back-to-school for next year, the mood is going to be set its going to set from what's happening I think in this holiday.

So overall it’s a pretty I feel comfortable with what we have got set in place from a guidance standpoint. And then when you are talking about spring I mean we talked a little bit about it earlier, Jason did, so far I think we see a lot of positive momentum for spring, but I don’t want to get ahead of ourselves until we really know what happens with holidays, and in terms of any type of opportunity next spring with inventory levels I do think that when the retailers book spring for next year, we are in the deepest darkest part of recession so you would assume that those inventory levels were built with a conservative mentality.

Now I think again I think its too soon to tell hey it will be a lot more business for spring, I don’t know that yet, I mean we have got to get in there I do think that spring is going to be a little closer to season I don’t think the retailers out there right now are going, hey I want to bring in a bunch of spring product early and build up my inventories early before actually may be the Easter vacation is in full swing so I think it’s still a little closer to the actually kind of selling season right now.

So we don’t see it going back the other way like $0.03 are going to be way early I know that, I don’t see that yet at all. I think they are still in the conservative mode

Jeff Van Sinderen - B. Riley

Okay fair enough thank very much and good luck this quarter.

Operator

Your next question comes from the line of Edward Yruma with Keybanc.

Edward Yruma - Keybanc

Hi thanks for taking my question. Can you talk a little bit about some of the changes that you are talking about implementing within the girls business, have you actually lost core footage within that [floor] set? And how long do you think it’ll take to stabilize that part of business?

Jason Steris

Hey Ed, this is Jason here. Yeah, kind of things we are working on right now with our product and marketing teams just really trying to communicate with that customer and focus on the branding side of things, some of these vertical retailers competing on prices is not quite in the business that we are in right now, and we’ve got a really strong brand and we’ve got to focus on the quality and the branding aspects to product and I think there’s through this recession and what’s going on with some of the back fashion and trends, some of these bigger vertical retailers have been able to capitalize on some of this business right now.

However, I think for the industry as a whole and ourselves specifically just retrenching back in, and focusing on what we do best and that’s the branding and we are working on certain things particularly with the shortening of development process kind of how quick we can get to market with certain products, just on marketing efforts, the branding side of things like I mentioned and what’s reassuring for us is when we go back and look at where our business is strong which is not the core right now. Its much stronger where Volcom still sits in sort of the one, two, three spot as one of the genius brands right now and we are getting really good pocket to sell through, the feedback we are getting the team riders and a lot of the girls is super positive.

So I think we’ve got a good program. We just got to keep building on it and in terms of timing and how long that’s all going to take its just something that we are working on now and we are going to continue to build on. Its hard to really pinpoint, when we are going to see a turnaround. I’d say the one area where we’ve really seen some bright spots is with our swimwear lines that we have been doing for about three years now and that has kind of helped elevate the overall juniors program we're seeing actually some good growth there in that category in their girls footwear category, the Creedlers that’s another area we are seeing. So really toning in on categories where you might not see come of the price census products out there, same things with bags and luggage and some of the outer wears programs that we have so I think as we go into next year we will see a lot of exciting stuff from us and we will just continue to be a top juniors brand out there and focus on our in store sections and our overall messaging.

Richard Woolcott

Yeah hey and also not just from a Volcom point of view but from our industry as an action sports group and from the retailer that we were across I mean we are all working together to bring that customer back to the brands because right now because of all the opportunities out there with the fast fashion and the value driven product from some of these other competitors the vertical competitors I mean its affected everybody and so we are all as an industry I mean we are all in the same wavelength, we need to get that female customer back to that action sports use lifestyle branded product and everybody is kind of working towards that. So I think as a collective group the more that we all focus on it, the better chances we have of building that business back as an industry and its top of mind for everybody right now so hopefully in the coming years as we know trends change that we can get more of those customers back buying branded goods.

Edward Yruma - Keybanc

Great and I know you have talked a little bit of some of the product you have brought into the specialty channel can you also talk about or give us a quick update on your maces action sports doors have you entered more doors and what has the performance been like there? Thank you.

Jason Steris

Yeah sure Ed, Jason again here. We have been working with (Inaudible) about two years this November it'll be two years and then our focus right now is on our end store merchandising, our product distortedness and just making sure that, that in store experience is not the level that’s going to be the best for the performance in overall branding. And as Doug mentioned in his script we bought a new in store merchandiser and help those efforts and work directly with the visual merchandising teams on their end, keep those floors set up to speeds of our marketing initiatives and the overall presentation.

Some of the bright spots right now would be on the men, boys and kids side, its definitely the driver of our business right now possibly could see some door expansion on that end as we go into next year with some of the positive results that we are seeing there. But for right now, before we get ahead of ourselves with our new visual merchandiser, we really want to go back to the existing doors we are in, we are about a 105 doors and just fine tune the floor set, make sure we got the right sign adjust, the right product mix and before we add anymore additional doors on top of that that’s kind of our focus right now.

But overall the relationships really good, there is a momentum there working well with the new team on the East Coast and then the West Coast actions post office over here that teams are tight communication and we are pleased with the accounts so far so good.

Edward Yruma - Keybanc

Okay

Operator

Your next question comes from the line of Christine Chen with Needham & Company.

Christine Chen - Needham & Company

Thank you and congratulations on our solid quarter in this difficult environment.

Unidentified Company Speaker

Thank you.

Christine Chen - Needham & Company

So, you mentioned that your core accounts you are starting to see stabilization there. Does that mean that you feel like those are still around or are going to stay in business and if their credit issues have somewhat abated and demand there is starting to pickup a little bit?

Richard Woolcott

Christine, I will jump in here and hand it over on accounts receivables for Doug. I think that’s a great point. I think the majority of the accounts that we see now that are still in business are the ones that you are moving forward. Its been a tough road for a lot of retailers and they have had really buckled down and we have been right by their side working through with them and what we are seeing now is actually they are in the same build back mode that we are. They fine tune their floor sets, they have got the right philosophies in place with the floor managers on how to build a better relationship with their customers so from a retailers perspective they've really had to focus on their fundamentals just like we have and if they are standing and their stores look good right now, they are in a better position as they move into the future.

Now from the financial side, Doug, we are still seeing a little bit of leeway that we are seeing in the receivables but not too much.

Doug Collier

I do think that most of the people that we are going to go down probably we have at this point. There is maybe a handful of accounts out there that I think a many of the manufacturers in the industry are working with on terms and some other things like that. But it’s a very small amount and I think we have a large portion of those receivables reserve even as we continue to ship them product. So it's probably whichever if they were to go down probably not a big financial impact for us. But that’s the idea, do you think they are important accounts some of those ones that are out there and they do seem to be doing a little bit better as we are going along here. Business does seem to be getting better, they got their inventories down, maybe some have gotten a little bit of rent relief from their landlords. So, we are helpful that even that handful that they are going to make it back too. But outside of that I think the account base is looking pretty good.

Christine Chen - Needham & Company

And maybe I'm reading too much into it but it sounds like to me that the core business seems to be doing a little bit better than maybe the major business i.e. our top five accounts. Am I misinterpreting that or is that a fair assessment?

Richard Woolcott

I think that is a fair assessment and I think when we look at that you have got lot of those vertical retailers that value driven fast fashion is in the mall business so what we have seen is that the independent smaller stores are outside of that, that might be a little more tapped into that surrounding community or that little neighborhood tends to be doing a little bit better where the mall business it's been tougher in the mall business because of all the discounting and value driven type of strategy so I mean that’s basically what we are seeing on our end.

Christine Chen - Needham & Company

So I guess any recovery next year would probably mostly likely be led by core which is really where all the trends get set?

Richard Woolcott

Yeah and what I think kind of going back to my point of what the retailer has been through. I think even the retailers at the mall level and we have a lot of key retailers that are in the mall I think they are going to be in better position to next year I mean they have gone through the same process we have in terms of having to relocate their business, re-strategize things, looking at who they are competing with and anything outlays, do they better position themselves I think inventory is a big issue. You know that they now have their inventories levels under control so I think even to the biggest retail they are going to be in a much better position going into next year and so I think that you are going to see recovery hopefully at all levels. And when I look at what we have gone through, when I look at the good retailers that they still standing, I mean they are positioning themselves to be in a better position for next year. Across the board whether its inventory, their in-store merchandizing, the way that their customer service was setup A to Z. So I think everybody is going to be in a better position the big question is going to be the demand out there. How does the US economy, what it is going to look like next year and how does the consumer feel about going out and spending money next year.

But I think on our side, manufacturing and retailers I think we’ve been through a pretty radical process of having to retool our businesses and I think on our end we are going to be in a better position. We are going to be ready for when that business turns around.

Christine Chen - Needham & Company

Sure. Thank you and good luck for the holidays.

Richard Woolcott

Okay. Thank you to you.

Operator

Your next question comes from the line of Jim Duffy with Thomas Weisel Partners

Unidentified Analyst

Hi, this is actually Sam in for Jim. On the Electric business, what’s your current mix of hard goods versus soft goods and where do you see this mix going longer term?

Jason Steris

Hey, Sam, how its going. This is Jason here. On the soft goods program that represents approximately around 15% of our business and then on the goggles side it's about another 15% there. And then the rest is on the eyewear side. We were kind of talking about Electric a little bit before and I think currently I think the diversification between the eyewear, the goggles and the soft goods is probably at its strongest point its been just with having three strong product segments and the nice thing about the soft goods program being on the calendar and getting good sell through for fall and going in to next year feel pretty good about all three of those segments right now.

So I think it’s a good balance, a good mix, still primarily driven by eyewear which that brand is for the company and I think with the components of the goggles that are in the eyewear category and in the soft goods been the smaller percent. I think its well balanced.

Unidentified Analyst

Great and can you also give an update on potential expansion plans for retail source.

Richard Woolcott

Yeah, Sam this is Richard here. I think right now with the way the environment is and everything that’s happening out there particularly with our focus going back on our like our current initiatives in our existing categories. I don’t see a lot of expansion there right now may be on the next call we can present may be a specific kind of little snap shot of what we are doing with our retail but right now I mean we have got our 10 doors and we are focused on that and its not to say that if we got into next year there were some more opportunity out there that we wouldn’t look at it but right now we feel pretty comfortable with what we have got and just really trying to fine tune and better manage our existing business at retail and we had a question earlier about how we saw a little positive spiking in our own Volcom retail and that part of that is us diving back into our own systems here and our own, what does our product look like on the floor, how are we buying, how are we merchandising, what's our relationship like with our own customer? And that is really what we are focused on.

So may be next call we will talk a little bit more about where we see retail going but right now we are comfortable with were we are at. And just trying to keep our focus and our arms around the business in general across all of our segments and make sure that we are doing the right things so we are prepared for when things actually get better that we are ready to take advantage of the opportunities.

Operator

Your next question comes from the line of Ronald Bookbinder with Global Hunter.

Ronald Bookbinder - Global Hunter

Going back to Electric the improvement from the first half of the year was it more aggressive opening price points or was it the fact that you just expanded the SKUs with the soft goods and the goggles?

Richard Woolcott

Are you talking for Electric?

Ronald Bookbinder - Global Hunter

Yes.

Richard Woolcott

Yeah hey Ron. Could you repeat that Ron?

Ronald Bookbinder - Global Hunter

On Electric, the improvement from the first half of the year, the first half of the year Electric was down about 30%. So, you are only down 13% was it just the fact that you had more SKUs expanding into the soft goods and the goggles? Or was it the aggressive I know you had some more aggressive opening price points did you get a lot of attraction with that? What led to a better performance than you saw in the first half of the year?

Jason Steris

Yes. That’s a good question. I think its combination of all three of the product segments really. One being I got no program that we talked about, it’s been kind of testify the best line they put out today. There is a couple of new SKUs in there that kind of added some excitement within the kids range and then even entry level price point in some of the color wares for basic key. And then so I think just having the best product possible kind of create a lot of excitement around the sales program and then a couple of price points but, I think it’s for the biggest driver [privy] with their soft goods and accessories program and compared to last year, I mean we added a full range of bags, the full range of luggage.

Well rounded T-shirts and Fleece line that hats, the caps everything was on a calendar, is on their apparel calendar which we work on. We got the reps out there, at the same time with the Volcom inline. So, that’s probably the one area that probably had a more favorable comp and then I was cited of things, I mean I think things have gone Richard said a little bit better than they were in the first half. The products themselves are couple of new SKUs in there that have a little bit more aggressive price points than we had in the past and look some of those styles have been successful for us.

I think where I think the category just heated up a little bit better kind of into those later months of summer and then what we saw in the first half. So, definitely a combination between all three but I'd say the soft goods would be the one area and accessories where there is an added SKU count.

Ronald Bookbinder - Global Hunter

Okay and on the denim you highlighted the strength of the denim. How much was denim up year-over-year and also was it product in washes or I know you had more focus marketing that you wrapped around the product or was it the aggressive opening price points that lead to the strong performance there.

Jason Steris

Yeah, hey Ron, I'm Jason and again. Denim for us, it's been a category we've been a leader in for a lot of years we refer to it as backbone of our brand and this year we came out swinging with one of the best lines. You know that we've had in a longtime and just really line that right up with a, I think a real great marketing campaign that the guys came up with which is the Volcom brand jeans road tested. It's wrapped around the athletes. The team liners, the Volcom entertainment some of the bands that we work with and just hidden that consistent message on the head and tying that into the whole package from whether the in-store, the window, the labeling, the packaging, the catalog, and just kind of having that road tested message out there help to drive product out there and we had a lot of products in the market place because we have been a leader in that category and our accounts are they put trust into the program, they buy it deep and we were able to back it up and help kind of push that product through at the retail level.

In terms of pricing, I did mention that $50 jean as an example. Definitely not the volume driver for the whole program we've been very successful outside of price points. We just saw that as an opportunity to take some more market share in the denim category as you continue to growth that category. But it was a highlight of or should I say a bright spot of overall business. We did see good sell through and we'll continue to build on that and add a more losses where it makes sense. I'd say overall it was just great product with a great marketing program and this hit home run. I was just going to continue to build on that and if you cannot be any year around program for that and appreciates the part from our retailers.

Ronald Bookbinder - Global Hunter

And lastly its seems like in the spring you really focused a lot or marketing on the board shorts and neither had some success I mean you were just talking about how you really wrapped the marketing around the denim this past fall is there a product that you especially wrapping the marketing around for the winter and then what would you look for in the spring?

Jason Steris

Yeah it’s a great question, similarly how we gave got the marketing message with the denim we are doing the same at the board chart its called proving ground. Its our spring summer products launch, we are seeing it carry even further into fall a little bit where as this year we pull back a little bit early and you see that being more important to the to later summer months just if you see the consumer kind of buying a little closer to market so you will see [grassroots] program carries throughout spring, summer and early parts of fall and then kind of we shipped into the outer wear program that's another area where we have, we can't take a step back and take it like the three areas that we are going to focus on in terms of marketing and product support its going to be your boy chart which is the proving ground for serve and then you got the outer wear program which will wrap in our whole Program around the GDS and working with some of our team riders on the signature jackets and then you’ve got sporting skate, music and fashion would be the whole denim program with the road test so you are going to have overlap in those campaigns throughout the year but if you go from July to December you’ve got a solid campaign and you can hit home on three major categories that really represent the brand.

Operator

At this time I would like to hand the call back over to management for any closing remarks.

Richard Woolcott

Okay. Well, I just want to say thank you everybody for being on the call and for the support you’ve given us through the recession and now that we are in the build back process. I appreciate it very much and we look forward to talking to you again early next year. So thank you.

Operator

This concludes today’s conference call. You may now disconnect.

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