Swell times fading for surfwear retailer

SYDNEY - Surfwear retailer Billabong International has downgraded its profit forecast as its biggest sales period in the US faces an unprecedented impact from recession.

Gold Coast-based Billabong says it expects to report full-year net profit in the range of A$160 million ($204 million) to A$165 million, compared to A$176.4 million in the 2007-08 financial year.

The company also seeks to raise A$290 million in a capital raising, which will be used to reduce its net debt to about A$450 million.

Billabong will launch a two-for-11 entitlement offer to raise up to A$290 million, at an offer price of A$7.50 per share, the company said yesterday.

Billabong shares entered a trading halt on May 14, and last traded at A$10.62. They are expected to resume trading on Wednesday.

The institutional component of the entitlement offer is fully underwritten to raise about A$200 million, while the retail component may raise up to an additional A$90 million.

Billabong's founder and largest shareholder Gordon Merchant intended to take up his full entitlement, the company said.

In a trading update, Billabong chief executive Derek O'Neill said weaker US trading conditions were the primary reason for the guidance downgrade.

Order numbers for the typically profitable back-to-school period in the US autumn, which are usually placed by May 10, were well down, he said.

"This year by that date approximately 25 per cent of our account base had yet to place an indent order for back-to-school Fall which starts shipping at the end of May," O'Neill said. "This is unprecedented."

A further 10 per cent of clients have had their shipments cancelled due to their high credit risk, or they were no longer in business, he said.

Orders that were placed were generally lower than normal as retailers were operating with lower inventory during the downturn, O'Neill said.

Orders were also being placed later in the seasons, meaning shipments normally made in May or June would now be made next financial year, affecting this year's bottom line.

Billabong's Australasian business was faring better, with the Federal Government's stimulus packages helping local sales, O'Neill said.

"Overall the stimulus packages have been certainly good for boardsports retail," he said.

While not offering specific guidance for 2009-10, O'Neill said he expected it would be some time before retail conditions fully recover.

"I'm not sure spending patterns are going to come back to where they were for quite a while, I think that would be a bit too optimistic," he said.

"But the fact is as well that all those retailers out there all have walls and they have to fill it with product, and at some point they'll want to get the best product in there."

The company said its final dividend this financial year was likely to be lower than the 55.5c offered in fiscal 2008.

- AAP