SurfStitch eyes steep losses following another profit downgrade

SurfStitch shares have tumbled following a fresh warning that earnings are set to fall far short of expectations.

Surfstitch founders Lex Pedersen and Justin Cameron pictured at the ASX listing ceremony at the stock exchange in Sydney. (Picture: Toby Zerna)

Embattled online surfwear retailer SurfStitch has seen its shares plunge over 30 per cent after reporting another sharp downgrade to its guidance, while announcing the appointment of a new chief executive after the shock recent departure of Justin Cameron.

The firm said it now expected to revenue to fall $20.3 million short of expectations due to an issue with the treatment of a licensing deal, resulting in its financial year 2016 earnings forecast shifting from a $2m-$3m profit to an expectation of a $17.3m-$18.3m loss.

The company also used today’s profit update announcement to report the hiring of Mike Sonand as its new chief executive.

In March, co-founder and later CEO Mr Cameron stepped down and then in May the firm slashed expected earnings from $15m-$18m to just $2m-$3m, with its stock nosediving 60 per cent on the news.
Mr Cameron left to team up with private equity to make a potential takeover bid for the company but no bid has yet been sent to the SurfStitch board.

Mr Sonand, whose appointment will take immediate effect, has previously held senior roles at Myer, Globe International, Just Jeans and Pacific Brands, while more recently serving as chief operating officer of Charles Parsons Group.

“There are both major opportunities and challenges and one of my first priorities is to establish an operating and management framework that I believe will restore the business to a position of strength,” he said.

Surfstitch added there had been no further deterioration in trading conditions since it last cut its forecasts on May 3, with the disappointing update tied to the reversal of revenue from the amendment of a perpetual licence contract.

The group said it expects to return to profitability in the 2017 financial year.

At 10.12am (AEST), Surfstich shares traded down 31 per cent at 28c, well shy of its 2014 listing price of $1 a share.