As Billabong undergoes its four year long transformation strategy, which was announced in August 2012, the company has had to take a hard hit before improvements can be seen.
The surfwear brand suffered a net loss after tax for half year of $536.6 million. The result was impacted by $567 million of significant items, including $427.8 million non-cash impairment for goodwill and brands and $106.6 million relating to non-cash write down of its investment in Nixon.
Overall sales too were down to $699.6 million from $761.6 million from the corresponding period of last year. In Australasia sales dropped 1.6 per cent. Despite interest rate cuts, the bricks and mortar retail environment remains challenging; however, there is continued strong growth online. Also, constant currency terms sales fell 5.3 per cent in the Americas, driven largely by poor retail conditions in Canada and store closures. Heavy competitor discounting occurred in the US throughout December.
“We continue to address issues of the past and are seeing some positive signs emerging in several markets and witnessing early benefits of the transformation strategy. These results emphasise that significant structural change is essential to return the group to profitable growth,” CEO Launa Inman said.
“Our focus remains on simplification of the business, reducing costs and continuing to build a culture of transparency and accountability providing a platform for future growth for our brands.”
As part of its transformation, it hopes to close 160 stores by June 2013 with already 119 retail outlets closed. It’s also reducing supplier numbers from over 275 to 50 commencing March 2012, while also advancing its global strategy for its girls and women’s wear.
“Our management team, including those who have taken on new responsibilities in recent months are having a positive impact in addressing the well-publicised challenges faced by the group,” Inman said. “However, given the lead times, the benefits from reduction in supplier numbers and brand improvements strategies will not be seen in this financial year.”
Since the December trading guidance of full year underlying EBITDA of $85 million to $92 million, the group has continued to face difficult trading conditions in Europe and the performance of Nixon has not met expectations. Performance of the rest of the group remains broadly in line with expectations. The Board now expects full year underlying EBITDA to be in the range of $74 million to $85 million in constant currency terms.