Billabong has downgraded its full year profit estimates as the recession in the US bites into the company's earnings.

The Australian surfwear producer said that based on year-to-date results and its current trading outlook, it is expecting to report full year net profit after tax in the range of A$160m to $165m for the 12 months ending 30 June 2009, compared to $176.4m in the prior corresponding year.

"The earnings forecast revision is attributable largely to weak US earnings. Additionally, further impairment testing by the company at year end may result in non-cash charges," a statement said.

The charges, which are expected to relate to various retail assets, are not anticipated to exceed $10m  pre-tax for the full financial year and include a $2.3m charge already announced in the first half results.

"Since Billabong's last market update in February, a deterioration in trading conditions at a consumer level in the US in late April and early May, together with a reduction in forward orders within the company's US wholesale account base and the strengthening of the Australian dollar against the US dollar, has led Billabong to review its expectations for the remainder of the 2008-09 financial year," the statement said.

The company said that during the February to April period, the signals from the US retail market have been mixed.

Billabong added that it experienced a subdued sales month in March but saw a considerable spike in early to mid April, around Easter, with comparable store sales in its own retail network lifting 7% compared to the prior year.

However, the period from late April through early May saw a rapid deterioration in company owned retail sales, with comparable store sales down in the high teen to low 20% range.

This was lower than the company's original expectations and Billabong said it now forecasts this current level of activity in its own retail network will continue through to the remainder of the 2008-09 financial year.

In contrast to the problems in the US, Billabong's European business remained on course for double digit growth in the 2008-09 financial year with continued strong growth in Germany, while the retail environment in both the UK and Spain remains soft, and Eastern Europe has recently weakened, it said.