Is there another shocker coming from troubled online surf wear retailer SurfStitch (SRF) after it halted trading in its shares yesterday ahead of another update?
The indications are that there is more bad news in the offing, given the company’s poor history of updates in 2016 so far, and their timing.
It will be the second earnings update in as many months and SurfStitch said in its request for a trading halt yesterday that the information will be made public by the start of trading tomorrow.
SurfStitch shares plunged 50% last month when it warned earnings for the year ending June 30 could plunge thanks to problems integrating a number of recent acquisitions and relaunch of its e-commerce operations amid a slump in demand in its biggest market, North America.
Now some analysts are saying the company could report a loss for 2015-16.
“The trading halt is necessary to allow Surfstitch to provide the market with a further update on its anticipated pro-forma EBITDA for the year ending June 30, 2016," it said in the statement to the ASX yesterday morning.
Its shares last traded at 40.5 cents each on Monday, valuing the company at $110 million. Seven months ago it was worth more than $550 million which was also double its value at the time of its December 2014 ASX float.
The company first backed away from full-year earnings forecasts of about $18 million in February, saying it wanted to have the flexibility to invest in online content such to boost sales of its products such as board shorts, bikinis and surfboards.
But just two weeks later, the retailer shocked investors by revealing that co-founder Justin Cameron had resigned unexpectedly as chief executive and was considering a potential privatisation bid, backed by private equity investors. That mooted offer has yet to appear.
According to media reports this morning Mr Cameron has seen the error of his ways and wants to return to the company, but had been rebuffed by the board
In May it slashed its earnings before interest, tax, depreciation and amortisation (EBITDA) forecast to between $2 million and $3 million for the 2015-16, compared with EBITDA of $13.9 million (meaning a whacking great second half loss) in the December half and $7.7 million in 2015. Now it looks like downgrading even that weak update and a loss for the year to June wouldn’t shock the market. It has been a long time coming.
