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Billabong losses widens in the first half

By Prachi Singh


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Billabong’s total sales of 508.3 million Australian dollars (392 million dollars) were down 5.8 percent on constant currency, taking the sale of Sector 9 into account. Group EBITDA excluding significant items of 29.3 million Australian dollars (22 million dollars) was down 21.1percent as reported and 20.9 percent on constant currency.

Commenting on the first half development, Billabong Chief Executive Officer Neil Fiske said in a press release, “We would see a lift in the second half such that we expect full year EBITDA will be ahead of the prior period on a comparable basis. With yesterday’s announcement regarding the sale of Tigerlily, we’re simplifying our portfolio and paying down debt. We’re seeing a strong profit lift in the Americas. On that basis we affirm our FY17 EBITDA guidance, adjusting for Tigerlily.”

Billabong EBITDA doubles in the Americas

The company said, overall, gross margins were flat to the prior period. A net statutory loss of 16.1 million Australian dollars (12 million dollars) was recorded compared with a loss of 1.6 million Australian dollars (1.23 million dollars).

The company said, standout result was in the Americas, where EBITDA before global allocations more than doubled to 10.3 million dollars (up 6.2 million dollars or 152 percent), with earnings momentum extending into the second half on the back of margin growth of 170 basis points and lower costs. After a slow first quarter, sales and margins improved in the second quarter. Sales were down overall for the half, reflecting the effect of the sale of Sector 9, some store closures and a fall in orders from a large United States retailer which was in Chapter 11 for a part of the period.

However, comparable direct-to-consumer revenue (including ecommerce and bricks and mortar stores) was up 5.8 percent on a constant currency to 57.9 million dollars for the half. Revenue from ecommerce grew 22.7 percent in the half, driven by a 41.5 percent pcp gain from Brand Billabong in North America.

The overall retail market in Asia-Pacific faced significant challenges in the first half. Retail trading improved in November and December with comparable store sales slightly positive in December although down 3.7 percent for the half. Amidst all of this, RVCA grew again with wholesale equivalent revenue (including sales to owned retail) up 14 percent constant currency. Ecommerce grew 17.7 percent to 4.9 million Australian dollars (3.7 million dollars) for the half.

After a period of improvement in Europe, Billabong said, trading moderated in the first half following the late arrival of cooler weather and macro factors such as Brexit. Comparable direct-to-consumer revenue was up 1.3 percent constant currency, with a slight dip in bricks and mortar sales being more than offset by a 44.4 percent increase in constant currency ecommerce revenue.

“There are three key aspects to the first half result that give us confidence going into the remainder of the year,” said Friske, adding, First, there is a strong profit lift in the Americas as we enter its seasonally bigger second half. Gross margins in the region were up 170 basis points overall year-on-year. Inventory was much improved, CODB was down and EBITDA more than doubled. Next, we are seeing forward gross margins improving in every region, as the benefits begin to flow from our global sourcing and concept to customer initiatives. Leaner inventories and the absence of any further currency pressures that have impacted recent results in Asia-Pacific and Europe also give us confidence.”

Billabong expects to post improved EBITDA in H2

The expected improvement in the underlying EBITDA for the second half of the 2017, the company said continues to be based on line-of-sight improvements from the group’s key initiatives.

Billabong said, the group’s previous guidance of EBITDA in the 60-65 million Australian dollars (46-50 million dollars) range for the 2017 financial year needs to be updated for the sale of Tigerlily which will be treated as a discontinued operation in the 2017 full year results. This treatment is expected to reduce the group’s continuing business EBITDA reported for the year by approximately 8 million Australian dollars (6.1 million dollars), which represents Tigerlily’s full twelve month EBITDA contribution to the group.