Billabong has been undertaking a turnaround strategy which it believes is now paying off

Billabong has been undertaking a turnaround strategy which it believes is now paying off

Australian surfwear company Billabong International says it has reached a turning point in returning to profitability, despite widening its losses and reporting a fall in full-year sales.

The company fell to an AUD77.1m (US$61.1m) net loss for 2017 after writing down the value of several of its secondary brands, including Kustom, Honolua, Xcel and RVCA by AUD94m. Chief executive Neil Fiske said the tough retail market had forced it to discount heavily to move stock, hurting profit margins.

EBITDA, excluding significant items and discontinued businesses, however, was up 2.8% to AUD51.1m. Total sales fell 4.7% to AUD974.7m, while comparable sales edged up up 0.1%. E-commerce sales overall grew 22%.

Americas was the driving force in what Fiske said was a strong second half, with EBITDA up 46.9% to AUD45.7m and comparable retail sales up 8%. A weak Australian dollar, however, hurt earnings in the Asia Pacific, resulting in a 28.3% decline in EBTIDA to AUD23.4m, while comparable store sales were down 5%.

Europe delivered its fourth consecutive year of EBITDA growth, up 8.9% to AUD17.1m thanks also to a strong second half. Sales were down 1.6% for the full year, but up 2.8% in the second half.

Fiske said he had been confident its strategy would produce a strong second half and drive overall EBITDA growth for the year, despite a first half that was behind the prior year.

"We have achieved those ambitious goals. This result marks a turning point for the company and one on which we can build.''

He said Billabong had three core objectives for the second half: continue the turnaround in its largest market of the Americas; expand comparable gross margins across all of its regions; and reduce the cost of doing business – all of which Fiske said the company achieved.

"Looking ahead, market conditions remain challenging, particularly in Australia, but we see opportunities for sustained earnings growth driven by further expansion in gross margins, acceleration of our direct to customer channels, strength in the Americas, growth in our RVCA brand, expanded global distribution, cost efficiencies and the ongoing benefits of our global platforms."