Billabong International Limited said currency fluctuations pushed sales in its Americas segment down 6.2% to A$317.5 million ($282.9 million) in constant-currency terms for the fiscal first half ended Dec. 31. As reported in Australian dollars, sales were down 17.6%, reflecting the negative currency impact. Management said declining sales to the Americas were also reflective of a weak consumer environment in North America.
Consolidated group sales were A$721.0 million ($641.2 million), down 2.8% in constant-currency terms, translating to a drop of 10.8% as reported in Aussie dollars.
Constant-currency EBITDA in the Americas segment slipped 4.0% to $33.7 million in the first half, or down 17.4% as reported. Excluding the global overhead allocation and segment foreign exchange gains and losses, EBITDA margins were 13.4% of sales, which management called a significant achievement given the lower sales and harsh trading environment. Management added that trading to the U.S. remained patchy for the quarter despite improving sales trends in the companys owned-retail operations. Additionally, management said retailers have remained cautious regarding buying patterns and have kept minimal inventory levels, adding that sales to retailer Pacific Sunwear were down about 50% for the period.
Sales in the company’s North America owned-retail operations increased 3.3% compared to the prior year period, which management said reflected slight growth in store numbers and may be an indicator that consumers were prepared to shop in stores with a good range of new-season product. Comp sales for N.A. were down about 10%.
Regarding other regions, Billabong management said Europe remained strong for the company as sales increased 2.6% in constant-currency terms on particular strength from France and Germany. Sales in the Australasia region were down 1.4% as a relatively strong performance in Australia was offset by weakness in South Africa, Japan and New Zealand. Revenues were down 6.2% in the Americas compared to the year-ago period.
For the upcoming fiscal year, Billabong said it expects no significant improvement on weak trading conditions in the U.S., but management said lower operating costs associated with overhead reduction during the past year should help the Group build margins.
Regarding outlook, management said the group expects North America business to continue to experience challenging conditions and added that there is no indication of recovery from the larger mall-based customers.
The company reaffirmed its original guidance of 5% growth in net profit after tax in constant currency terms excluding the prior years impairment charge.
