Billabong expects its earnings for the fiscal half ended December 31 to decline sharply, due largely to inclement weather in Australia and Europe as well as the impact of the bankruptcy of Pacific Sunwear.
At the company’s annual general meeting, Neil Fiske, managing director and CEO, said that based on sales so far in its fiscal year, Billabong expects first-half EBITDA to be “down substantially” versus the same period last year, due mostly to weakness in the first four months in Australian and European retail.
On the positive side, EBITDA in the U.S. in the first four months of the year is ahead of year-ago levels, with comps at its stores in the region also positive. However, Fiske noted that Pacific Sunwear, a major customer of its RVCA brand, “recently emerged from bankruptcy and is well down on previous trading levels.”
The company’s retail sales in Asia Pacific and Europe have been “slow for the first four months, in part due to unseasonal weather.” In Australia, October was particularly weak across the surf retail market as a whole. However, as weather conditions have normalized, sales have “picked up substantially” in November.
“These same weather patterns have affected our wholesale accounts, so while we have had fewer re-orders across the first four months, the improving trends should extend to our wholesale accounts as well,” said Fiske.
However, full fiscal year 2017, excluding significant items and the impact of divestments to be made, is expected to be in the range of AU$60 million to AU$65 million, which is ahead of the prior year. After returning to profit in 2015 for the first time in four years, Billabong lost AU$23.7 million after tax in 2016 and underlying EBITDA fell from AU$65.7 million to AU$57.5 million, despite a 4.5 percent increase in sales to AU$1.1 billion.
The company’s core brands are Billabong, Element and RVCA.
Photo courtesy Billabong
