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Billabong Shares Drop by a Record on Forecast for Lower Profit  |  BBG:AU

Surfersvillage Global Surf News, 4 December, 2008 : - - Billabong International Ltd., the world’s biggest publicly traded surfwear maker, plunged by a record in Sydney trading after saying first-half earnings will probably fall for a second straight year. Billabong plummeted 18 percent to A$8.20 at the close of trading, the largest decline since first selling shares to the public on Aug. 11, 2000.

The U.S. recession has accelerated a slowdown in demand for clothing and surfing accessories, causing earnings per share to fall in the six months ending December, the Gold Coast, Australia-based company said in a statement today. Billabong also cut its annual EPS growth forecast to between 6 percent and 10 percent in the year ending June, down from an October prediction for a rise of as much as 16 percent.

“Billabong’s poor performance is a reflection of the broader economic slowdown in the U.S., rather than the health of its brands,” Craig Woolford, an analyst at Citigroup Inc., said in a note to clients. “The company’s strategy is to protect its brand equity and minimize discounting. While we agree with the philosophy, its sales growth will likely continue to suffer.”

Citigroup affirmed its “hold” rating and A$8.78 price target on Billabong. U.S. customers, Billabong’s biggest market, are deferring deliveries of new clothing to cope with the slowdown while slumps in the value of the Canadian dollar and South African rand against the U.S. currency cut the value of sales. Chief Executive Officer Derek O’Neill is trying to reduce his inventory levels to minimize the impact.

The reduced annual EPS forecast comes less than six weeks after Billabong raised earnings expectations, citing a slump in the Australian dollar. The Australian dollar has fallen 34 percent since reaching a 25-year high of 98.5 U.S. cents on July 15.

Read the full report by Robert Fenner at Bloomberg,com

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