Neil Fiske, chief executive of Billabong International, was encouraged that the group has returned to profit for the first time in three years, but he added that there were still significant operational reforms to be undertaken and he has started to implement a more varied distribution strategy, with strong investments in online retailing.
The company regained full ownership of its branded online sales websites in Australia and Europe during the half-year. Fiske wants to accelerate the transformation of Billabong's retail operations in Asia-Pacific into an omni-channel platform, starting with Australia. The platform is to encompass offline and online stores, wholesale accounts and licensed stores. The company is finalizing agreements with suppliers and expects to implement the platform towards the middle of next year.
Fiske said that multi-channel consumers drive two to three times the sales of retail or online-only consumers and that the move is critical to support Billabong's relationship with young consumers. The investment is also meant to support the company in managing customer relationships, while improving margins and inventory turns.
This retail strategy is accompanied by investments in the group's supply chain, such as the implementation of technology to track purchase orders in real time, to evaluate the performance of suppliers and align inventory to orders. The group has also restructured its sourcing operation in Hong Kong.
For the time being, Billabong said that its earnings and asset values have stabilized, with a much stronger balance sheet and capital structure. Fiske said that it would take more time for some of the changes to appear in the financial performance. Further reforms and investments in the brand are to be funded by cost efficiencies across the business.
There are still some uncertainties around the second half of the fiscal year, notably the impact of the lower Australian dollar. This means a favorable exchange rate for U.S. sales but higher costs to import products into markets such as Australia. The company also mentioned the industrial dispute in Californian ports as a potential cause for disruption of its upswing in the U.S. market. It still predicts that the second half will deliver the strongest contribution to its Ebitda, although this bias could be eroded over time with improvements in wholesale earnings in North America.
