Surfwear giant Billabong has confirmed a major store cull is on the cards for this financial year, following slipping sales and a loss of $275.6 million.
New Billabong CEO Launa Inman – formerly managing director of Target – has announced the retailer will slash 82 non-performing stores from its retail network in financial year 2013 as part of an ongoing brand restructure.
As previously reported on ragtrader.com.au, the group has already closed 58 non-performing stores as at June 30, as part of the initial Billabong Transformation Strategy outlined earlier this year.
The announcement follows a 7.9 per cent drop in revenue for the retailer compared to the prior corresponding period, with net profit after tax (NPAT) of $33.5 million on reported global sales revenue of $1.55 billion, including online sales growth of approximately 50 per cent.
Despite proceeds received from the partial sale of Nixon and equity capital raising in June, adjusted earnings before interest, tax, depreciation, amortisation and impairment (EBITDA) of $120.6 million was down 40.9 per cent in reported AUD terms.
As a result, Inman has announced the implementation of a number of new strategic initiatives to tag onto the initial Billabong Transformation Strategy.
“At an underlying trading level, the group remains profitable. [However], as previously flagged to the market, the group’s results have been adversely impacted by various significant and exceptional items. In recording the various significant and exceptional costs and charges, the group has endeavoured to adopt a conservative position,” she said.
“The group is well on track in implementing the initiatives outlined in the previously announced Strategic Capital Structure Review and will continue to implement a number of new strategic initiatives announced today as part of Billabong’s Transformation Strategy. These initiatives will target both cost savings and revenue growth.”
According to the company, the renewed Transformation Strategy will take place over the next four years, and will be targeted to deliver EBITDA greater than 2.5 times fiscal 2012 year pro-forma EBITDA of $84.0 million, excluding 100 per cent of Nixon and significant and exceptional items.
Specifically, Billabong aims to achieve these objectives by focusing on the following key strategic priorities:
Simplifying its business
Leveraging Brand Billabong
Leveraging other key brands
Realising the strategic potential of retail
Continuing to expand Billabong’s global e-commerce platform
Globalising and integrating the supply chain
Looking forward, the group said it expects the current challenging trading conditions to continue during the 2013 financial year, with EBITDA currently expected to be in the range of $100 million to $110 million in constant currency terms, Sssuming no further deterioration to market conditions.
This compares to pro-forma fiscal 2012 year EBITDA of $84.0 million, excluding 100 per cent of Nixon and significant and exceptional items.
As previously reported on ragtrader.com.au, the retailer announced plans for its initial Strategic Capital Structure Review earlier this year, on the back of dire group results for first half of the 2012 fiscal year, and warned up to 150 loss-making and underperforming stores could be shut-down.