Billabong profit plummets as Australian retailers struggle

Iconic surfwear brand Billabong is the latest victim of the retail downturn, posting an 18% fall in annual profit, on the back of another fall in the Commonwealth Bank’s Business Sales Indicator.

Billabong reported annual profit of $119.139 million in the year to June 30, down 18.4% from the previous year.

The company has blamed the Australian dollar and a weak retail environment for the fall, which has been heightened by global economic uncertainty.

“With the exception of the USA and some Asian territories, global trading conditions have generally deteriorated significantly,” the company said in a statement.

“This has been exacerbated by the recent global economic uncertainties and extreme volatility in currencies, especially the Australian/US dollar.”

Meanwhile, the latest Business Sales Indicator from the Commonwealth Bank has confirmed that conditions are unlikely to improve any time soon.

The BSI, based on credit and debit card transactions across the bank’s 200 merchant facilities, fell 0.3% in July after dropping 0.5% in June.

In addition to retail, the BSI accounts for a broad range of spending including travel, business services, motor vehicles and utilities.

Alarmingly, eight of the 20 industries tracked contracted during the month, compared to five industries in June.

Vehicle sales recorded the worst result, falling 2.2%, while miscellaneous stores fell 1.2% and mail/telephone order providers fell 0.8%.

Amusement and entertainment continues to be the strongest category, up 1.9%, followed by wholesale distributors and manufacturers (up 1.2%) and transportation (up 0.7%).

NSW recorded the weakest result, with sales down 1.2% in July, while the ACT had the strongest rise in sales of just 0.2%.

The BSI hasn’t shown any gains in spending in recent months, recording a fall in March before stalling in April and May, and then dropping in June and July.

CommSec chief executive Craig James says the BSI continues to be the bearer of bad news.

“The picture remains fairly consistent with what we have seen all year. There have been no clear indications of a turnaround in spending, and no doubt the recent volatility seen in local and global markets will also be preying on consumers’ minds,” James says.

“We therefore expect things to trudge along at this pace for some time to come.”

On the upside, CommSec says the Reserve Bank will be taking notice of such weak figures, particularly in light of global economic turmoil, suggesting interest rates may remain on hold even longer.