Billabong ▲ +0.007 | PPR - 0 | American Apparel ▼ -0.006 | The Buckle ▲ +1.19 | Columbia ▼ -0.61 | Deckers Outdoor ▼ -0.32 | Dicks ▼ -0.95 | Foot Locker ▼ -0.61 | Genesco ▼ -0.29 | Iconix Brand Group ▼ -2.72 | Jarden Corp ▼ -0.55 | Nordstrom ▲ +0.30 | Luxottica ▼ -0.58 | Nike ▼ -0.56 | Pacific Sunwear ▼ -0.05 | Skullcandy ▼ 0.00 | Sport Chalet - 0 | Urban Outfitters ▼ -0.13 | VF Corp ▲ +0.18 | Quiksilver ▼ -0.06 | Zumiez ▲ +0.07 | Macys ▲ +0.47 | Tillys ▼ -0.10 |
Ticker Sponsor
Professional Services
Friedman Stroffe & Gerard, P.C.

FSG’s Action Sports Practice Group provides legal services to the action sports industry. Our clients include surfers, skiers, snowboarders and skaters, as well as sponsors and leading apparel companies. Our attorneys serve in positions with industry organizations such as the Association of Surfing Professionals. We know your business and can provide full-service legal solutions to meet your organizational needs.

More Professional Services...
Readers Say
Useful on a daily basis
Useful on a daily basis

It's well balanced information that is useful on a daily basis. I'm very satisfied with the Executive Edition. I start each day with SES and a big cup of coffee!

- By Tom Ruiz, EVP Sales, Volcom
Executive Edition rules
Executive Edition rules

“Shop-Eat-Surf” is now officially, the first stop in the morning for industry news. Accurate reporting, no sensationalism, and just the facts. Refreshing support to an incredible industry with a very bright future. Tiffany has cemented her role in the industry....the site is thought provoking, and inspirational. Learning the stories of others is incredibly useful. Great way to connect the retail community with the wholesale and financial, instantly and nationwide. ... And the Executive Edition rules.

- By Bob Hurley, Chairman, Hurley International
Industry Insight

MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.

Details on Industry Insight.

Tiffany Montgomery
Print This Article

More details about Billabong's reduced forecast - retail stores the main factor

By Tiffany Montgomery
December 09, 2008 8:44 AM

I wanted to find out more about why Billabong reduced its guidance for the 2008/09 year (its fiscal year ends June 2009), so I read through a transcript of the conference call company executives had with analysts. One of the biggest themes - a decline in performance at Billabong-owned stores in the U.S. is hurting total company results. Executives commented on many other topics, including discounting, withdrawing orders from some weakening retailers, and the status of the wholesale business.

Last week, the company downgraded its view of its fiscal year (July 2008-June 2009) that it had given in October. Billabong now says it expects earnings per share growth of 6 percent to 10 percent, down from 12 percent to 16 percent. Revenues are expected to grow 25 percent.

The sales line is boosted by acquisitions and favorable currency exchanges, the company said. The organic Billabong business (minus recent acquisitions) has some slight growth, but lower than expected.

The lower Australian dollar to U.S. dollar continues to benefit profit translation and will provide a further upside in reported results, particularly in the second half (Jan-June 2009). EBITDA is expected to grow 20 percent for the year.

Here are more highlights from the call. Billabong executives on the call were CEO Derek O'Neill and CFO Craig White.

US retail: The biggest reason for Billabong's downgraded view is the performance of Billabong-owned retail stores in the U.S. Retail now accounts for more than 20 percent of the US business, executives said.

To give some idea of the retail declines, comps at Honolua stores in Hawaii are down 21 percent. Traffic at the flagship Billabong store in New York was down 29 percent in November, and posted similar declines throughout the fall.

California has definitely slowed, and got noticeably tougher in Southern California from September on. Inland California is tough. In October and November, Florida was quite tough also.

Comps at all the company's retail banners - Honolua, Quiet Flight, Billabong - declined in November, with the majority declining double digits.

Billabong expects to see negative retail comps through the majority of its second half (Jan-June 2009).

The company is working to bring down its costs in retail overhead by not aggressively filling open positions and working with landlords to reduce costs.

Executives said the company will be selective in opening new stores and will look much closer at any new expenditure in retail.

Wholesale: The company has seen a marked slowdown in repeat business, though it has a good forward order book in the U.S. and Europe. Retailers are trying to get their inventory just right and there has been some pushback on forward order deliveries.

Executives said they have seen some evidence in the U.S. and Australia that retailers are being more selective in the amount of brands they buy from and expect some brand consolidation in the industry.

Receivables: The company is starting to see some retailers struggle. The company has taken a close look at the health of some its account base and elected to withdraw some forward orders itself. Executives said they are keeping a close eye on receivables.

"We're going to support (retailers) where we can, but there will be limits to the extent we can go to. We're not a bank at the end of the day."

Discounting: The company said it plans not to participate in promotional activity. Executives said promotional activity may support short-term targets but could lead to longer-term expectations from consumers that pressure brand equity.

"We don't plan to participate in any race to the bottom in regards to pricing," O'Neill said.

(See a preview of the SES Executive Edition about this very issue here.)

Other territories: The company is taking a "subdued view" of its Australian business. The European business is strong in Germany, Central Europe, Scandinavia and Eastern Europe but weak in Spain, England and Italy.

DaKine: Is performing well and above Billabong's original expectations. Overall, DaKine's margins are lower than the Billabong group, but the company expects to increase those margins in the next 18 months to two years.


Articles You Might Have Missed