Surfwear chain in $77m loss
GOLD Coast surfwear chain Billabong is hoping a wave of social media followers can revive the company’s fortunes.
Billabong yesterday posted a net loss of $77.1 million for FY17, more than three times greater than its loss a year earlier.
It cited weak consumer spending and an outdated bikini range in Australia as factors.
CEO Neil Fiske said the relevance of its brands – which had been improved via a surge in social media followers – was key to its success.
A TURNAROUND at Billabong’s American operations was unable to prevent the Gold Coast surfwear chain suffering a massive blowout in its full-year loss.
The company yesterday posted a net loss for FY17 of $77.1 million — threefold the $23.7 million loss it sustained a year earlier.
The group an $8.4 million loss before significant items but this ballooned when total impairment charges of $106.5 million — related to the writedown of a string of brands — was included.
Chief executive Neil Fiske said the Americas division had delivered a “vast improvement” during the financial year, with EBITDA up by 46.9 per cent and retail sales up 8 per cent.
This was in stark contrast to FY16 when tough retail conditions and a low Australian dollar (Billabong pays for its product in US dollars) hit earnings.“The result in the Americas, on top of a strong EBITDA lift in 1H17, gives us confidence that this region, often described as our greatest opportunity, has turned the corner,” he said.
Mr Fiske said the major drag on the result was Australia.
“If it was not for the widely reported weak retail conditions in Australia we would have been well up in the guidance range,” Mr Fiske said.
“Not all of the weakness can be attributed to market conditions. We had some misses in our execution that weighed on our result, notably in brand Billabong and to a lesser extent Element.”
He said the group had stuck to a successful formula it had used in the prior year in women’s swimwear in Australia, only to fall behind the trends, something they were ahead of in the US.
“Recognising this, we quickly tested the US range in our Billabong stores and got a stronger outcome,” he said.
The group’s $51.1 million pretax earnings was up 2.8 per cent, in constant currency terms, on the prior year, excluding significant items and the discontinuation of swimwear brand Tigerlily which was sold in April. However, this was below Billabong’s forecast of EBITDA between $52 million and $57 million.
Revenue from continuing operations was down 9 per cent to $979.5 million in the year to June 30, while sales revenue fell 6.7 per cent, in constant currency terms.
Mr Fiske said market conditions remain challenging, particularly in Australia, but the group expects sustained earnings growth driven by increasing gross margins.
Billabong expects EBITDA for the current financial year to exceed FY17. Shares in Billabong gained half a cent to 75.5¢. They began last financial year at $1.27.