Billabong International Ltd. saw top line growth for the fiscal year ended June 30 boosted by acquisitions and a weaker Australian dollar versus the U.S. dollar and euro, but earnings slid on a non-cash impairment charge in retail assets. That charge of A$.7.4 million ($6.2 mm) after taxes, sunk operating profit to $A152.8 million ($128.4 mm). In mid-May, Billabong had forecast operating profits to be in the range of A$160 million ($134.3 mm) to A$165 million ($138.6 mm).
Gross profit margins of 53.2% fell 170 basis points due to the “challenging economic environment in the United States.”
Management said the group's operations in the Americas were the most adversely impacted by the global economic slowdown although softness in North America was somewhat offset by strength from South America. Reported sales in the Americas were up 34.9% (12.1% in constant-currency terms) to A$836.8 million ($702.6 mm), primarily reflecting a nine-month contribution from the acquisition of DaKine. Excluding the acquisitions of DaKine and Sector 9, as well as the Quiet Flight retail business which was acquired in June 2008, sales in North America were down approximately 13% in U.S. dollar terms. Management noted that the Billabong and Element brands experienced mid-teens declines in U.S. dollar terms, but added that the declines were less significant when excluding Pacific Sunwear — which Billabong said it is reluctant to endorse due to PacSun's recent “shift into a value-driven retailer.”
Europe remained a stand-out performer with reported sales improving 23.4% to A$388.0 million ($325.7 mm) (up 9.3% in constant-currency terms). Management said Germany and other central European countries were the “stand-out territories” while Italy was soft during the latter part of the year.
Reported sales in Australasia were also higher, up 7.6% (or 3.9% in constant-currency terms) to A$444.3 million ($373.0 mm), principally driven by strong growth in Asia and Japan. Billabong expects operating profit to remain flat for 2009/10 with a constant-currency growth of about 5% when excluding the impairment charge of this year.
