Weak consumer spending and an outmoded bikini range in Australia has weighed on surfwear retailer and wholesaler Billabong's annual earnings, the group's chief executive Neil Fiske says.
The group's $51.1 million in earnings before interest, tax, depreciation and amortisation (EBITDA) was up 2.8 per cent, in constant currency terms, on the prior year, excluding significant items and the discontinuation of swimwear brand Tigerlily which was sold in April.
However, this was below Billabong's forecast of EBITDA between $52 million and $57 million.
Revenue from continuing operations was down nine per cent to $979.5 million in the year to June 30, while sales revenue fell 6.7 per cent, in constant currency terms.
Mr Fiske said the major drag on the result was Australia.
"If it was not for the widely reported weak retail conditions in Australia we would have been well up in the guidance range," Mr Fiske said.
"Not all of the weakness can be attributed to market conditions.
"We had some misses in our execution that weighed on our result, notably in brand Billabong and to a lesser extent Element."
He said the group had stuck to a successful formula it had used in the prior year in women's swimwear in Australia, only to fall behind the trends, something they were ahead of in the US.
"Recognising this, we quickly tested the US range in our Billabong stores and got a stronger outcome," he said.
Mr Fiske said the group had continued the turnaround in its largest market, the Americas, which had shown significant improvement in sales and gross margins in the second half.
The group made an $8.4 million loss before significant items but this ballooned to $77.1 million when total impairment charges of $106.5 million and the discontinuation of Tigerlily were included.
The majority of significant items were related to brands and goodwill writedowns while $11.7 million was linked to the termination of a contract with an omni-channel provider.
Mr Fiske said market conditions remain challenging, particularly in Australia, but the group expects sustained earnings growth driven by increasing gross margins.
Billabong expects EBITDA for the current financial year to exceed the 2017 financial year's, subject to reasonable trading conditions and currency markets remaining relatively stable.
Shares in Billabong gained half a cent to 75.5 cents.
IMPAIRMENTS WEIGH ON BILLABONG:
* Loss of $77.1m vs $23.7m loss
* Revenue down 8.9pct to $979.45m
* No dividend
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