Billabong

Wednesday 3rd August 2011

Macquarie has upgraded global sports clothing retailer Billabong (ASX: BBG) to Outperform.

BBG’s interim result for the first half ending 30 December 2010 was a shocker by its high growth standards, impacted by a large degree by a strong AUD versus most major currencies. EBITDA of $94.6 million was a large decrease of 17.3% in constant currency terms (a decrease of 23.4% in reported terms) as BBG felt soft retail conditions in its home turf of Australia.

BBG itself views the financial year ending 30 June 2011 as a transition year, and group sales revenue for the full financial year ending 30 June 2011 is expected to be in the order of $1.7 billion, representing an increase in the order of 25% in constant currency terms. BBG expects its net profit for the financial year to 31 June 2011 to be 2% - 6% lower in constant currency terms.

The Outperform rating comes at a time when Australian retail sales data, released today, was weaker than expected in June 2011 falling 0.1% on a seasonally-adjusted basis vs an expected rise of 0.3%. The weak retail data adds to increasing gloom in the Australian retail sector which is expecting weaker profits over the near term as consumers remain cautious.

Contact IRG on 0800 437 8489

Broker recommendations are sourced from the IRESS software trading platform and Morningstar equity analysts.

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Billabong

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