Shares in Billabong have plunged after the surfwear and skateboards retailer revealed the lower Australian dollar and weakness in the North American market had dented earnings in the first four months of fiscal 2016.
Billabong shares closed 16.0 cents, or 22.9 per cent, lower at 54.0 cents.
"From an overall trading perspective, the challenges in the Americas market and the FX (foreign exchange) pressures on product costs mean EBITDA (earnings before interest, tax, depreciation and amortisation) for the first four months is approximately $2.5 million behind the prior year," chief executive Neil Fiske said at the company's annual general meeting on Tuesday.
Mr Fiske said the Christmas trading period, especially in Australia, would be critical to Billabong's half-year financial results.
Billabong expects its performance in the second half of the financial year will benefit from various business improvement initiatives.
"The traditional bias of our earnings to the first half will be less pronounced than last year," Mr Fiske said.
He told shareholders that at this time last year, the Australian dollar was worth 87 US cents, but is around 71 US cents now.
Although apparel markets are expected to eventually adjust to these levels, Billabong's margins will experience pressure in the short term.
Much of Billabong's debt is also in US dollars, so it has become more expensive to service it.
A lot of Billabong's capital expenditure and project costs are also in US dollars.
On the positive side, Billabong's US dollar earnings are more valuable in Australian dollar terms.
Mr Fiske said that in the last few months, the retail sector in North America has been soft, including big action sports chainstores, department stores, teen retail and tourist retail.
Specialty retail has been flat and cautious.
The skateboard market has been particularly slow, which has hurt sales of Sector 9 and Element skateboards.
A third factor affecting earnings is high price discounting online and in shopping malls, which has prompted consumers to wait for deals.
Earlier, Billabong chairman Ian Pollard said Billabong won't pay a dividend in the 2015/16 financial year because it is still working on improving its financial performance - two years into a financial turnaround.
Mr Pollard said although Billabong grew earnings in fiscal 2015, and reported its first full-year profit since 2011, there is still more work to be done on many of the company's key projects.
Mr Pollard said that although currency movements and consumer spending patterns are affecting the company in the shorter term, he was confident of the resilience of Billabong's key brands.
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