Shares in Billabong (BBG) ended down more than 20% yesterday as the company became the latest casualty of nervy investors punishing companies which drop surprise earnings downgrades on an unsuspecting market.
The recovering surfwear retailer said its earnings for the first months of its new financial year were weaker than those of the same period a year ago.
And the meeting was also told there was no chance of the company resuming paying dividends for the 2015-16 financial year.
For some investors the news ended optimism that the struggling retailer’s fortunes were changing for the better.
That was after Billabong reported its first positive earnings since 2011 in August, revealing a net profit of $4.2 million for the year to June.
For a small group of investors, this was confirmation that Billabong, which has been undergoing a lengthy revamp under chief executive Neil Fiske (who became head of the company in 2013, the fourth CEO in 12 months) had turned the corner after years of losses, poorly executed expansion, and rising managerial and shareholder instability.
But yesterday’s annual meeting was told that earnings before interest, tax, depreciation and amortisation were $2.5 million lower than the prior year due to challenges in its American markets and foreign exchange pressures.
“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,” Mr Fiske told yesterday’s meeting.
He told shareholders that the Christmas trading period, especially in Australia, would be critical to Billabong’s half-year financial results.
BBG 1Y – Billabong dumped after recovery hopes dim
And looking into 2016, 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.
The shares plunged more than 23% to a day’s low of 33 cents, before steadying. They closed off 22% at 54 cents.
The sell-off yesterday mirrored similar treatment for retailers such as Kathmandu and Dick Smith Holdings in recent months (although Kathmandu shares jumped sharply last Friday after better sales news for the first quarter was revealed).
Earlier, Billabong chairman Ian Pollard told the meeting that the company won’t be paying a dividend in the 2015-16 financial year because it is still working on improving its financial performance – two years into a financial turnaround.
He said that although Billabong grew earnings in 2015-16, 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.
