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Tiffany Montgomery
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Billabong reports full-year results

By Tiffany Montgomery
August 18, 2011 6:08 PM

Billabong described trading conditions during its 2010/2011 fiscal year as “very difficult” as it dealt with a volatile global market, natural disasters in Japan and New Zealand, weak consumer spending in Australia, foreign currency changes and rising costs.

 

The company had already warned that the year would be a transitional year as it worked to digest and integrate its recent acquisitions, namely its major retail buys.

 

However, the company said it believes it now has the right mix of wholesale and retail and that it has a clear path for its goods to reach market. Executives also believe by fundamentally realigning its business model, there is a lot of upside in the future for the company.

 

Here is a summary of Billabong’s results released today for its year ended June 30. A major bright spot was the improvement in the U.S., including at company-owned retail stores.

 

Billabong's stock fell 26% in trading Friday to $3.82, a new 52-week low.

 

2010/2011 Financial Results

All figures are in Australian dollars.

 

Total revenue: up 23.8% to $1.68 billion in constant currency, i.e., excluding the impacts of foreign exchange rates. Up 13.6% in reported Australian dollars.

 

Net Profit After Tax: down 6.9% to $119.1 million in constant currency. Down 18.4% in reported currency.

 

(The appreciation of the AUD vs. the USD and the Euro impacted reported sales by $123 million and NPAT by $18 million, Billabong said.)

 

Gross Margin: down to 53.8% vs. 54.4% last year

 

EBITDA: $191.9 million, down 16.2% in constant currency. Down 24.3% in reported currency.

 

EBITDA margins: down to 11.4% vs. 17.1% last year

 

Globally, while conditions in the U.S. improved, Europe softened in the final two months of the year, and the economic situation in Australia worsened.

 

In addition, the increased costs of goods, the volatility of markets and erratic consumer spending also impacted business.

 

“Overall, a very difficult year,” the company said in its presentation.

 

Integrating new retail 

Billabong had previously said that 2010/2011 would be a transitional year as it digested its retail acquisitions and began to move its own brands into newly owned stores.

 

During the year, the company said it went through “a fundamental realignment of the business between wholesale and retail.”

 

Direct to consumer now accounts for 38% of Billabong’s global revenue, up from 24% the previous year. It currently has 639 stores in its stable, up from 380 last year.

 

Billabong now believes it has the right mix between wholesale, online and bricks and mortar, it said in filings today.

 

The company’s growing retail might also allowed it to negotiate improved terms with major third party brands it carries in stores.

 

Billabong has also been working hard to integrate its retail operations, and has standardized IT and Sales Intelligence systems, beefed up retail management, added design teams specifically tasked to get product to market quickly in its stores, and invested in its online platforms.

 

Billabong is approaching $50 million in online sales, accounting for 3% of total company revenue, and expects to generate $200 million in online sales by the end of 2015.

 

See Page 2 for West 49 details, regional results

 

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