Billabong shares cop pounding: Low Aussie dollar and weak US trading add to struggle

BILLABONG shares copped a pounding yesterday after the surfwear giant revealed a low Australian dollar and weak trading in North America.

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BILLABONG shares copped a pounding yesterday after the surfwear giant revealed a low Australian dollar and weak trading in North America hit earnings in the first four months of the financial year.

Shares in the Gold Coast-based retailer plunged almost 25 per cent in the wake of the weak trading update before recovering slightly to close 16¢, or 22.85 per cent lower, at 54¢.

But chief executive Neil Fiske says Billabong is merely facing “short-term turbulence” and will ride its way to a stronger second half.

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Founder Gordon Merchant is also confident the Gold Coast surfwear company after a string of losses is finally gaining traction by “getting back to our roots”.

Billabong grommets, pictured at Burleigh representing the future of Billabong. Picture: Glenn Hampson

“It is all about keeping it simple, finding the right people, having good product — that’s critical — and concentrating on what made the company successful in the first place; that’s what Neil brought me back in for,” he told the Gold Coast Bulletin after the company’s annual meeting on the Gold Coast yesterday.

“I have been heavily involved in the product and design, jumping on them because they are not getting things out of the warehouses quickly enough, and making them stick to the basic fundamentals.

“I don’t know if we can get back to our glory days but it won’t be through lack of trying.”

Mr Fiske said underlying earnings were $2.5 million behind the prior year due largely to challenges in the Americas and foreign currency pressures.

“The conditions in which we operate have deteriorated since last year,” he said.

“We are confronting the pressures caused by a much stronger US dollar compared to the Australian dollar and euro.”

He said specialty retail remained flat, the skate hard goods market had been “particularly slow” and Billabong’s market had been hit by price discounting and online promotion but it doesn’t intend “to enter the fray”.

The next six weeks during the key Christmas trading period, especially in Australia, will be critical to Billabong’s first-half financial results.

However, Mr Fiske remains confident Billabong is set to post a stronger second half and will surf its way into a second consecutive profit.

The Burleigh Heads retailer posted a net profit of $4.2 million in FY15, a major turnaround from the $234 million loss the prior year.

It was Billabong’s first profit since 2011 and the first time since the 2008 global financial crisis the company increased underlying earnings.

“We can certainly say there has been a little bit of turbulence in the Americas but that’s not specific to us, it’s the whole sector,” Mr Fiske said.

“I look at that as short term turbulence; we’ll ride it out and stay focused on our agenda.”

He dismissed speculation of a merger with embattled rival Quiksilver.

“Our answer is to stay focused on ... our seven part strategy. We’ve got a lot to do ... and we are maniacally focused on executing that plan,” he said.

Billabong will not pay a FY16 dividend,.

Instead it is choosing to invest in its omni-channel platform, which it sees as “the biggest game changer” to help it reconnect with younger consumers.

Shannan North, Billabong’s global brand manager, told shareholders that e-commerce, which represents just 2 per cent of Billabong sales, represents “ a clear opportunity for growth” and is tipped to more than triple by 2019.