Surfwear giant Billabong has today reported a 'significant' deterioration in sales – leaving a cloud of uncertainty over the iconic brand.
In an announcement on the Australian Stock Exchange this morning, company secretary Maria Manning, said trading results from November and preliminary retail sales data up until December 11 showed a steep drop in sales.
“The sales growth trend has deteriorated significantly in this critical retail period,” Manning said. “The reason for the sales slowdown vary by region, but the data received reflects the European sovereign debt issues and the ensuing fears of global recession which are impacting consumer confidence and spending patterns significantly.”
The figures are in sharp contrast to the group's last trading update in October, which reported that sales revenue for the three months up to September 30 2011 were up on last year by 24.7 per cent. At the time, the company also anticipated strong future growth, however, things have now taken a turn for the worse.
Billabong said sales in the group's company owned European stores declined 'sharply' in November and the unseasonally cold summer weather in Australia also impacted sales.
Manning said Europe is 'by far' the group's most challenging market, followed by Australia and that the poor macroeconomic and trading environment is hampering the group's ability to clear excess inventory.
Billabong has now enlisted its advisor, Goldman Sachs, to carry out a capital structure review.
“The company is undertaking a further operational review of the business to ensure additional appropriate reductions are made to overheads in the current financial year and into the 2012-2013 financial year,” Manning said. “It would be premature to speculate on the most likely outcome of this review and, while nothing has been ruled out, raising equity is not the preferred path at this time as the company is reviewing other options.”
Billabong expects earnings before interest, tax, depreciation and amortisation for the six months to December 31 to be $70million to $75million, down from the previous corresponding period's $94.6million.
Gold Coast-based brand Billabong International was founded in Queensland in 1973 and sells a selection of surf and skate clothing and accessories.