Shares in Billabong International suffered a 26 per cent wipeout to the lowest in a decade, after the surfwear retailer reported a sharp decline in profit.
Net profit was $119.14 million in the year to June 30, down 18.4 per cent from the prior year, on the back of a weak retail sector and a strong Australian dollar.
Billabong said that 12 months ago, it had anticipated a return to earnings growth rates in excess of 10 per cent in constant currency terms from the current financial year.
“This guidance was predicated upon a global recovery gradually taking hold,” Billabong said in a statement on Friday.
“With the exception of the USA and some Asian territories, global trading conditions have generally deteriorated significantly.”
Billabong said this had been exacerbated by recent global economic uncertainties and extreme volatility in currencies, especially the Australian dollar against the US dollar.
Shares in Billabong fell 26 per cent, or $1.35, to close at $3.82, the lowest since January 2001.
Billabong said it would not provide guidance on earnings growth until the direction of the retail sector becomes clearer.
The company needed “more visibility of these matters and more particularly their effect on consumer spending patterns.”
Nevertheless, Billabong expects strong growth in underlying earnings in 2011/12 as the benefits of cost controls and acquisitions flow through.
But this would not translate into corresponding growth in annual profit because of higher tax.
“There were a few things that were obviously a little out of our control that impacted the business during the year,” Billabong chief executive Derek O’Neill said.
These included a significant deterioration in consumer spending patterns in Australia, the impact of natural disasters in Australia, Japan and New Zealand and the softening of consumer spending in Europe late in the year on the back of general economic concerns throughout the region.
“However, from a strategic perspective, it was a very successful year and a base has now been set for the next phase of growth for the Billabong group,” Mr O’Neill said.
Billabong acquired major retail assets in Australia and Canada in 2010/11 as part of its strategy to sell more directly to the consumer, rather than via wholesale.
Billabong said that in 2010/11, sales revenue in Australasia rose 19.5 per cent to $502 million as a result of the acquisitions of SDS/Jetty Surf and Rush Surf in Australia.
