Fiske told investors on Wednesday that he remains “prudent and practical” about how much progress can be made on an Australian turnaround in FY18, after reporting a 5 per cent decline in comparable sales locally for the year ended 30 June.
“We’re hunkered down and riding out the storm [in Australia], just as we’ve rode it out in the Americas,” Fiske told Inside Retail after reporting a turnaround eight per cent increase in comparable sales from operations in the Americas.
“There’s still a lot of promotion in the Australian market…we don’t know how the consumer is going to play out.
“We’re just going to try to keep our inventory lean and our margins up,” he continued.
Billabong is facing an intensified competitive backdrop heading into the crucial November-December trading period, which has also been signalled as a headwind by other apparel players such as Specialty Fashion Group this week.
Fiske said the first weeks of FY18 trading in July and August had been “encouraging”, with initial summer lines hitting stores beginning to get a response, but stressed that Billabong isn’t “out of the woods”, and will find generating positive momentum difficult in the first-half.
The Billabong, Vonzipper, Surf Dive’n’Ski and Element brand owner booked a $11.7 million impairment on its omnichannel program in July and slowed progress on changes to fix underlying issues, but it will be full-steam ahead in FY18, with an additional $10 – 20 million to be invested over the next two-years, with Australian operations slated to be a key digital growth opportunity.
Fiske believes that online could be 10 – 15 per cent of total Australian sales, conceding that the current figure is well behind the local market average.
“We’re really concentrating efforts here in Australia, where we see the most opportunity, if you think about our e-commerce here its only 1.5 per cent which is well off what typical retail would be,” said Fiske.
Learnings from the Americas will inform changes to Australian operations in the coming twelve months, with margin protection initiatives such as global sourcing and concept-to-customer to be applied further across all regions.
“[We’re] really putting a merchant front end on the business and making sure that we get our pricing right, our margin architecture right and focus on our assortment, so whatever gains we can get in initial gross margins we can hang on to in final margins,” Fiske told shareholders.
10 – 15 stores will also be closed across the brand portfolio in Australia in FY18, as the company looks to wind up onerous leases and trim its position slightly.
When asked whether this was indicative of further store closures in the coming years or a sign that the company is looking to lean up its operation to focus more on online, Fiske said Billabong still believes in bricks-and-mortar and will look to increase the overall size of the portfolio in the medium term.
“We still believe very much in brick and mortar, in the context of a true omni experience – there’s an opportunity to add more stores in a format where a customer can come in and really see that,” Fiske explained.
Shareholders have had mixed reactions to Fiske’s plans for the business, with initial trading after the result sending shares up more than six per cent to 80 cents, before declining eleven per cent to end trading down 5 per cent to 72 cents.
One investor congratulated the company on revitalising its brand with younger shoppers, citing increasing social media engagement as a key sign of brand health.
Fiske later said he’s happy with where Billabong has managed to get its brand portfolio and will now look towards maintaining that momentum while working on getting product mix right and keeping costs down.
“I feel really good about where we’re at, and I feel really good about the strength of our brands. I see that in the core indicators of brand health, such as social media followership around the world,” he explained.
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