Just like its fellow retailer JB Hi-Fi, Billabong was reporting at its AGM in October to be trading well but following the finalisation of actual trading results for November and receipt of preliminary retail sales data for company owned stores for the period ended 11 December, the sales growth trend has “deteriorated significantly”.
In October, Billabong indicated that group sales revenue in the three months to 30 September 2011 was up 24.7 per cent in constant currency terms compared to the prior corresponding period (pcp) and the business anticipated strong underlying EBITDA growth compared to the pcp in constant currency terms in the 2011-12 financial year.
But based on preliminary sales data to 11 December and assuming a continuation of current trends, it is now anticipated that sales revenue for the six months to 31 December will be approximately 5 per cent higher than the pcp in constant currency terms (down approximately 3 per cent adjusting for the impact of acquisitions).
While the Group’s trading results remain heavily subject to performance across the balance of the critical December trading period, the company anticipates reported EBITDA for the six months ending 31 December 2011 to be in the range of $70 million to $75 million, compared to $94.6 million in the pcp.
On a constant currency basis, the company anticipates this EBITDA range would be approximately $4 million higher, with the range on an ‘as reported’ basis being adversely impacted in particular by the stronger AUD against the USD and Euro for the six month period ending 31 December 2011 compared to the pcp.
Billabong blames the sales slowdown on the European sovereign debt crisis and the ensuing fears of global recession which are impacting consumer confidence and spending patterns significantly.
“Overall, Europe is by far the Group’s most challenging market, followed by Australia. The slower global sales come as the general market environment has become highly promotional and this is placing pressure on gross margins,” the company said in an announcement.
“Much of the consequent loss of gross profit is leading to a reduction in EBITDA given the limited ability to reduce the relatively fixed cost base in the short term.”
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