Now, this could be bad news, or rather, unwanted news from the US for Billabong, the big Gold Coast-based surfwear group.
One of its major American retail outlets, the huge Pacific Sunwear of California Inc, reported worse than expected quarterly figures Monday night in the US.
The group incurred a bigger loss than expected for the 3rd quarter, thanks to a sharp fall in sales late in the three months, and it also forecast a bigger loss and write-downs in the current fourth quarter, with an even larger fall in same store sales.
Pac Sun is a large US West Coast based retailer of surfwear and other clothing for teenagers and above: Billabong features on its sales pages on the web.
In 2008 Billabong USA generated around $US500 million of the group's worldwide $US1.2 billion in annual sales.
Much of that $US500 million was generated through Pacific Sunwear with its 904 outlets in all 50 US states plus Puerto Rica.
Pacific has shut 36 of those in the past 12 months as sales have fallen across the country, a sure sign the slump in US retailing is hurting.
The rising Australian dollar is also taking a toll on Billabong's sales revenue and the currency's move to a 15 month high yesterday just shy of 94 US cents, saw Billabong shares lose 30 cents (or more than 2%) to $10.68.
The company said at the recent AGM that the dollar will have an impact on earnings if sustained.
"As an example only, based on the Group’s current full year profit forecast and year-to-date October actual average monthly exchange rates and now assuming spot rates of AUD/USD 92 cents and AUD/Euro of 61 cents for the balance of the financial year, NPAT growth in reported terms would be down on the prior year by approximately 6% when excluding the prior year’s impairment charge."
Billabong said the first half result depended on the way sales went in the US and Europe.
"The test for the balance of the year is whether the recent performance in the US is sustainable and whether the trends emerging within the Group’s own retail operations become apparent in coming months within the wider wholesale account base," CEO Derek O'Neill told the AGM.
But that is now in doubt because from what Pacific said in its profit announcement, there has been a noticeable downturn in the US in the past month or so.
"Through the first 11 weeks of the third quarter, our business performed at the higher end of our internal expectations led by some improving trends in our Young Mens business," according to a statement from Gary Schoenfeld, Pacific's President and Chief Executive Officer.
"We've since seen a precipitous decline across both genders during the last two weeks of the third quarter and into the first two weeks of the fourth quarter.
"Thus, while we still expect an improvement over the fourth quarter last year, we remain intently focused on several key initiatives toward getting this company turned around."
That 3rd quarter sales and profit news, plus the poor 4th quarter outlook forecast saw Pacific shares fall in US after hours trading, down almost 20%, on the news.
Pacific Sunwear said it expects a 4th quarter loss of 28 US cents to 35 US cents a share.
The company posted a third-quarter net loss of $US10.9 million, or 17 cents a share.
A year ago it lost $US2.5 million, or 4 cents a share.
Revenue fell sharply, down 31% to $US268.3 million, from $US323.6 million in the same period a year ago.
Total company same-store sales fell 18% during the period.
That compares to the overall 0.2% in retail sales in October (and minus 2.3% in September) reported in the US on Monday as well.
And the outlook for the December quarter was rough:
"Assuming a same-store sales percentage decline in the low twenties for the fourth quarter of fiscal 2009, the Company expects to report a loss of approximately $(0.28) to $(0.35) per share," Mr Schoenfeld said in the earnings statement.
"This earnings range includes estimated non-cash store asset impairment charges of approximately $5 million.
"Any non-cash tax valuation allowance charges or additional store asset impairment charges that the Company may incur during the fourth quarter would increase the level of losses for the quarter."
All AIR material contained in the weekly publication, as well as on this website, consists of general information only. It is not intended as advice of any kind, including and without limitation investment advice, or to be construed as making any recommendations or statements of opinion in relation to any financial product or class of financial products or other investment opportunity and must not be relied upon as such. Investors should obtain independent investment advice before making any decisions based upon any information or material contained or referred to in this magazine and on its website, including in particular any investment in any financial product.
