More red ink for online sports clothing retailer SurfStitch which is now considering selling off more of assets and retreating from the US as it forecasts a doubling in losses for the year to June 30.
The company, which sells branded clothing and shoes, including Billabong, Quiksilver, Vans and Converse, online in Australia, Europe, the UK, the US and Japan, has been hit by the retail malaise that had whacked retailers in the US, Australia and Europe.
That malaise saw US teen retailer, Rue21 file for bankruptcy last week (which will allow it to shrink and hopefully stay in business). It joined a long list of US teen retailers that have gone out of business in the past few years, including Wet Seal, Aéropostale, Quiksilver, Pacific Sunwear and American Apparel.
SurfStitch told the ASX yesterday that weak apparel and footwear sales in its key markets, particularly in the UK, will drag it deeper into the red than the $5 million-$6.5 million loss forecast in February.
The company now expects a loss of between $10.5 million and $11.5 million for its 2016-17 financial year.
Being SurfStitch’s second downgrade for the year, it naturally sent the company’s shares tumbling. They lost more than 23% on the day to close at 7.4 cents.
The company said it will close its North American warehouse and office by January 2018 and transfer the management of its eCommerce platform Swell from the US to Australia.
"Although, considerable progress has been made in arresting losses in North America, the region will continue to be unprofitable for the foreseeable future," chief executive Mike Sonand said in a statement.
Mr Sonand said this would allow the company to focus on its two largest markets, Australia and the UK, while still maintaining a US online store.
Chairman Sam Weiss said the company was also considering selling more of its business assets to help it deliver positive cash flow. The company’s assets includes a digital surfing magazine called Stab, another site called Magic Seaweed which provides condition forecasts, and an online library of adventure sports videos.
SurfStitch sold its surfboards and surfing equipment business to investment group Gowing Bros for $17 million in December. The company, founded 10 years ago by Justin Cameron and Lex Pedersen in Sydney, reported a net loss of $8.3 million for the December 31 half year.
Cameron unexpectedly quit the business in March last year to weigh up a privatisation bid that went nowhere. The company’s fortunes have gone south ever since.
