Billabong – Clothing, Women & SwimwearFirst published on the Last Modified on the
Surf, Skate, Wake and Snow – An international brand powerhouse founded in Australia.
Check out recent Billabong collections on Australian Fashion Review Blog.
A term that is literally translated to mean ‘dead river’, yet ask any Australian under the age of 30 what Billabong is and you can be almost certain that this is not the answer they would give. It’s true the internationally renowned surf and skate label has managed to redefine the term for an entire generation, as well as becoming one of Australia’s finest exports. But where did it all begin for this global fashion juggernaut?
Billabong: A Timeline Snapshot
As of mid-2012, Billabong has approximately 6000 members of staff worldwide with the brand’s collections being licensed and distributed in more than 100 countries worldwide, available in around 11,000 retail outlets, which includes over 670 standalone stores. The majority of the brand’s revenue is generated in Australia, Europe, South Africa, Brazil, North America, New Zealand and Japan. The label’s brands are cleverly marketed internationally through association with high profile board-sports professional athletes, junior athletes and events.
Billabong – Not Just a Fashion Label
Billabong began sponsoring surf event in the late 1970’s, and to this day the world’s best known surf label continues to host some of the largest and most prestigious surfing competitions across the world, including: The Annual Billabong Pro at Jeffrey’s Bay in South Africa; Teahupo’o in Tahiti, which offers some of the largest swells the world has to offer; and Billabong Pipe Masters in Hawaii. Additionally, the brand host their own awards ceremony, ‘Billabong XXL’, which honours top surfers with accolades such as, Ride of the Year, Biggest Wave and Biggest Tube- Ride.
As the brand profile of Billabong expanded to include apparel and accessories for snowboarding, skateboarding and wake-boarding, so did the events on offer sponsored by the board-sports giant. Other events promoted include the legendary snowboarding competition Air & Style and skateboarding event City Squared. In addition, the brand has strong relationships with board-sport professionals to help promote and market their wares – a full list of professionals and Billabong events can be found on the label’s official websites.
What is Next for Billabong
In February of 2012 Billabong International announced that they would be shedding 400 jobs and be selling a part of their accessories brand as part of a major restructuring plan, which aims to restore the brand’s fortunes. The announcement came as the board-sports label reported a 71% reduction in net profits to $16.097 million for the 6 months to December 31st 2011. Although the news was sure to be worrying to employees, it proved to uplift the investors, with shares going up by 60%.
The revamp plan sees Billabong closing 150 of its stores worldwide, including 80 in its native Australia, resulting in the loss of 400 jobs, as part of a $30 million cost cutting plan. In an extra effort to reduce costs, they also sold a 48.5% stake in its watch brand Nixon to Trilantic Capital Partners (TCP). The sale valued Nixon at $432.71 million, giving Billabong net proceeds of approximately $265.78 million.
The brand said the money from the sale would go towards paying down debt after being hit by the rise of the Australian dollar against the US dollar and euro. Whilst sales were up 10% in Australia, they were down in the US and Europe, with net debt rising by almost 40%. The domestic market was hit by low consumer confidence, record saving levels and an unseasonably cool summer.
Also in February, Billabong shares were placed in a trading halt at the company’s request amid reports it had received a $850 million take over bit from TPG capital, a US private equity firm. In July, an announcement came that the brand was considering a second takeover offer from TPG Capital, markedly lower than the first, valuing the company at $695 million. It was also announced that that TPG intended to file a notice of a substantial shareholding the company after purchasing 14.5% of the brand’s stock form shareholders, Colonial First State and Perennial Value.
Company founder and largest shareholder with 15.6%, Gordon Merchant publicly announced that he was dumb to reject the first bid, so would he accept the second offer that would allow him to be part of the TPG consortium? Well a few days after the second offer was announced, Billabong invited the equity firm to take a look inside the company’s books, while still stating that they believed the current offer greatly undervalued the brand. What would come next in the takeover saga?
Inside sources say that the reluctance to accept the second bid from TPG in the hope of creating some bidding tension – a bidding war would be sure to drive up the valuation of the company. There is ongoing speculation that about rival bids from Pacific Equity Partners, alongside other private equity firms and offshore trade buyers.
Whilst no decision on the takeover has been made yet, Billabong still have a secret weapon up their sleeve, their new Chief Executive, former Target boss, Launa Inman. The highly regarded retailer accepted a consultancy role with Billabong in February 2012 and three months later she was appointed Managing Director, replacing Derek O’Neill, who was informed that his services were no longer required.
On August 27th 2012 Inman presented her four-year plan to return Billabong to positive sales growth and increase earnings by $155 million, which includes focusing on simplifying the business, leveraging its namesake brand, improving its supply chain and e-commerce offerings. The new initiatives with cost approximately $80 million, would help to unlock the inherent value within the company, however analysts were less convinced. “Given the performance of the Billabong brand in recent years, this will require a significant turn around in sales performance, which the market could struggle to take at face value,” said Nick Berry at Nomura.
The revitalisation plan was unveiled alongside a net loss of $275.6 million for the 12 months to June 2012, which is the company’s first annual loss since listing in 2001. Despite this Inman remains positive: “At an underlying trading level, the group remains profitable.”