Billabong back in profit as it kick-starts infrastructure projects

Billabong CEO Neil Fiske this week spoke of the "complex changes" the surfer brand is undertaking across its global operations to deliver "long-term profitable growth".

The retail exec said that two years into its turnaround, which was prompted by successive annual losses and the business arguably veering off-track under previous management, challenges still remain but he detailed a number of tech-led projects the company is undertaking to move it back into growth.

Indeed Fiske, who joined Billabong at the end of 2013, was speaking as the business reported its first full-year profit since 2011. In the 12 months to 30 June net profit after tax totalled AU$4.2 million compared to a $233.7 million loss one year before, while EBITDA for the period was $65.7 million – up 8.8% year on year.

Billabong also returned to profitability in Europe and grew sales in the US, although its bottom line in Asia Pacific markets dropped under AU$30 million due to a challenging retail market and currency affecting input prices.

Overall, the mood among the brand's senior team is positive, with Fiske detailing how he expects some of the infrastructure changes being implemented to help continue moving the organisation in the right direction. For example, Billabong has recently introduced NetSuite's eCommerce-led ERP system and JustEnough's planning technology to help better manage inventory, while hundreds of stores have been closed in recent years to streamline the company's portfolio.

The major projects on the agenda for Billabong's turnaround have been divided into four areas: Omnichannel, Concept to Customer, Sourcing & Supply Chain, and Logistics & Distribution. The former, which is in no little part being aided by the new partnership with NetSuite, will be piloted in Australia in the second half of the current financial year before being considered for wider international roll-out.

It would appear that much of JustEnough's work with Billabong falls under the Concept to Customer programme, which has been designed to improve the company's speed to market. It is hoped that the brand's work with various partners in this area will result in more productive merchant assortments, speedier identification of emerging trends, improvement in core stock availability, shortening  of order to delivery times, faster inventory turns and reduced markdowns.

Other key strategies being implemented at the back-end of the business include the consolidation of suppliers, the diversification of production outside China and the rationalising of warehouses. For the former, the closing of the Montreal DC in November and the downsizing the Australian DC are viewed as significant steps.

"These projects are aligned with our seven-part turnaround strategy and are interlinked in ensuring that we quickly get the right product to the right markets in tune with what our customers want," explained Fiske.

"They are not only about driving a better brand experience for our followers but also providing operational savings that can be invested in marketing and growing those brands. To date we have identified $30 million in potential annual profit improvement from our global sourcing and logistics initiatives."

He added: "We will begin to see benefits in FY16, however the lead times in the business mean the benefits will take several years to be fully realised."

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