AUSTRALIA: Billabong to axe suppliers following H1 loss
- Swings to H1 loss of AUD536.6m (US$554.3m)
- Sales fell 8.1% to AUD702m, driven by 17.3% drop in Europe
- To cut apparel suppliers from over 275 to just 50
Losses in the six months to 31 December were AUD536.6m
Struggling Australian surfwear brand Billabong International has swung to a first-half loss after writing off the value of its brands - and says that from next month it intends to slash the number of apparel suppliers that it uses to less than one-fifth of the current total.
Billabong, which is also a takeover target for two rival bidders - VF Corp and private equity firm Altamont Capital Partners, as well as North American division boss Paul Naude and Sycamore Partners - said due diligence by the teams is expected to conclude next month.
But it also lowered its full-year guidance for the second time since December, blaming difficult trading conditions in Europe and a poor performance at the Nixon watch and accessories brand.
Losses in the six months to 31 December were AUD536.6m (US$554.3m), compare with a profit of AUD16.1m in the first-half of the prior year.
This year's results include AUD427.8m in non-cash impairment for goodwill and brands, and a write down of AUD$106.6m on the company's investment in Nixon. Excluding these items, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were up 9.9% to AUD57.2m, Billabong said.
Sales during the half-year fell 8.1% to AUD702m, driven by a drop of 17.3% in Europe and 5.3% in the Americas on a constant currency basis.
CEO Launa Inman said the company is seeing early benefits of its four-year restructuring plan outlined in August last year. So far it has closed 119 stores, and expects to have shuttered 160 in total by June.
But changes to its global supply chain will see it slash the number of apparel suppliers that it uses to less than one-fifth of its current level. From March it expects to cut these from over 275 to just 50 as part of a major overhaul of its global supply chain.
But she admitted that "given the lead times, the benefits from reduction in supplier numbers and brand improvement strategies will not be seen in this financial year."
Back in December Billabong said it expected full year underlying EBITDA to be in the range of AUD85m to AUD92m - but today (22 February) it lowered this forecast to between AUD74m and AUD85m.
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