SYDNEY—Surfwear retailer Billabong International Ltd says the economic tide is turning in the United States and the group is performing slightly ahead of expectations.
The retailer expects lower first half results, a strong second half and has reiterated its forecast of annual net profit growth in constant currency terms.
But Billabong warns the strong Australian dollar could drag its 2009/10 reported profit about six per cent below last year's full year result.
Billabong's 2008/09 annual net profit was $152.84 million, down from the prior year's $176.38 million after a sharp fall in US consumer spending.
However, chief executive Derek O'Neill told shareholders on Tuesday it felt like the worst of the downturn in the US was over.
"It feels like the tide has started to turn in the US and, from a trading perspective, the group is a little ahead of expectations, particularly within company-owned retail operations," Mr O'Neill told the annual general meeting on the Gold Coast.
"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."
Europe, the group's standout performer in the 2008/09, was performing in line with expectations leading into the Northern Hemisphere winter, he said.
And Australasia was tracking as expected, with good trading in Australia countered by some softness in Japan, New Zealand and South Africa.
Mr O'Neill says several factors would affect the group's first half-year reported results.
The prior half included trading before the global financial crisis, a $5 million gain and lower foreign currency hedge rates for product purchases in Australia and Europe.
Billabong says it expects a strong second half, in constant currency terms, reflecting various cost reduction programs and stronger foreign currency hedge rates for product purchases in Australia and Europe.
The group reaffirmed guidance of five per cent net profit growth in constant currency terms for 2009/10, when excluding the prior year's impairment charge, or 10 per cent when including the impairment charge.
However, given currency volatility and higher spot rates the reported annual reported net profit is now likely to be down about six per cent when excluding the prior year's impairment charge.
Mr O'Neill said each one cent movement in the average monthly Australian and US dollars exchange rate for the remaining eight months of the financial year above or below 92 cents will move reported net profit by about $500,000.
"For the AUD/Euro, each one cent movement in the average monthly exchange rate for the remaining eight months of the year above or below 61 cents will move reported NPAT by approximately $1,000,000."
Billabong shares closed down 37 cents at $10.58
