Billabong International shares have plunged by over 30 per cent after it forecast a decline in earnings for the first half of the current financial year. This follows a downgrade at JB-HiFi.
The surfwear retailer expects to report earnings before interest, tax, depreciation and amortisation (EBITDA) of between $70 million and $75 million in the six months to December 31, 2011, it said on Monday.
That would be up to 26 per cent down from the reported EBITDA of $94.6 million in the prior corresponding period.
"While the group remains focused on reducing working capital and maximising cash flow from operating activities, the poor macroeconomic and trading environment is hampering the group's ability to clear excess inventory," Billabong said in a statement.
"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 2012/13 financial year."
Billabong shares were down $1.22, or 33.5 per cent, at $2.42 at 1110 AEDT.
Other retail sector share prices were also down, with the likes of Harvey Norman, JB Hi-Fi, David Jones and Myer down by between four and seven per cent.
Billabong said it was not able to provide guidance for the full financial year given the poor macroeconomic and trading environment.
It said strong underlying EBITDA growth compared with the prior corresponding period, in constant currency terms, was not expected.
Investment bank Goldman Sachs would undertake a strategic capital review of the company, Billabong said.
"This review includes an assessment of all potential alternatives to strengthen the company's capital structure in light of the existing operating environment and the risk for further deterioration," Billabong said.
This would cover all of the company's balance sheet alternatives, it said.
An equity raising was not the preferred path at this time, Billabong added.
Billabong said management accounts for November and to December 11 showed sales growth had deteriorated significantly in the critical summer and pre-Christmas trading period.
Sales revenue growth in constant currency terms, and adjusting for the impact of acquisitions, for the three months to September 30 was 6.2 per cent, compared with the prior corresponding period.
By contrast, growth for the five months to November 30 was 0.4 per cent.
And Billabong said preliminary sales data to 11 December suggested sales revenue for the six months to December 31 would be about three per cent lower than the prior corresponding period, assuming current trends continued.
"Europe is by far the group's most challenging market, followed by Australia," Billabong said.
"The reasons 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."
Billabong said Australian store sales were hit by unseasonably cold summer weather, particularly in NSW.
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