Billabong's turnaround effort boosts FY17 EBITDA

In its interim trading update, Billabong International has announced that the company’s EBITDA for the year of 51.1 million Australian dollars (38.5 million dollars) was up 2.8 percent on a constant currency basis, and was less than a million dollars below the guidance range that it provided at the 2016 AGM and affirmed again in February.

“The first half is weighted toward APAC and the retail channel, the second half toward the Americas and the wholesale channel. The earnings profile of the company has shifted substantially to the second half, a trend we expect to see again in the year ahead. Overall, FY17 was a tale of two halves – the first half down but more than offset by a very strong second half. At our last AGM, we set some ambitious goals for the balance of the 2017 financial year. We achieved those and came in just shy of our guidance – despite a very challenging environment, particularly here in Australia,” said Ian Pollard, the company’s Chairman commenting on the trading update.

Billabong gains in the Americas and Europe

The company said, its global sourcing and concept to customer initiatives lifted gross margins by 90 basis points for FY17 – 210 basis points in the second half – and it expects further margin gains in the year ahead in every region.

The Americas, which has long been the top priority for the group’s turnaround, saw a 46.9 percent rise in full year EBITDA, with gross margin improvement of 290 basis points for the year and 380 basis points in the second half. Total comparable retail sales gained 8 percent, with brick and mortar stores up 2.3 percent. Ecommerce, which is most developed in the Americas at 7.4 percent of total sales, grew 25 percent.

In Europe, the company achieved our fourth consecutive year of growth in EBITDA. After a soft first half, the region, in the second half to end the year saw 8.9 percent increase in EBITDA. The APAC region, however dropped 28.3 percent in EBITDA for the year.

“Our cost structure is more competitive, investments in our global platforms are coming on line, including the launch earlier this month of our new ecommerce platform with Surf Dive and Ski. We have challenges in Asia Pacific but we are dealing with issues in APAC aggressively and comprehensively. We have every confidence that the actions we’re taking will turn this region around – just as they did in the Americas, added Neil Fiske, MD and CEO of Billabong.

As far as product assortment is concerned, the company still witnessed some softness in non-apparel lines such as accessories and hardgoods. In Billabong mono-brand stores, the company’s lead categories – boardshorts and women’s swimwear sales rose 13 percent year-to-date in the 14 comparable stores. Element, meanwhile, reported a turnaround in multi-brand retail, up 11 percent on a comp store basis with margins up over 300 basis points.

FY18 EBITDA expected to cross 51 mn Australian dollars

Overall, the group expects the FY18 EBITDA (excluding significant items) to exceed the FY17 EBITDA of 51.1 million Australian dollars, subject to reasonable trading conditions and currency markets remaining relatively stable. Given the increasing proportion of earnings represented by the Americas and Europe, the earnings profile for FY18 is expected to be similar to that of FY17, with the first half EBITDA below the prior corresponding period and all the growth biased towards the second half.



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