SURFSTITCH SHARES SURGE AS GROWTH ACCELERATES

Written on the 25 February 2015 by Nick Nichols

SURFSTITCH SHARES SURGE AS GROWTH ACCELERATES

SHARES in online action-wear retailer SurfStitch Group (ASX: SRF) surged this morning as the Gold Coast-based company reported significant growth across its key global markets.

The shares rose to a record high of $1.28 before settling around $1.24 up 5.5c on Tuesday's close and up 24 per cent since the company listed in December.

SurfStitch has presented pro-forma figures for the half-year profit, its first as a listed company, in order to flesh out the overall performance of the group which is showing growth well ahead of its peers.

The statutory results are limited to just the last two weeks of the December half and offer no meaningful insight into the overall performance of the group.

The statutory result shows a gross profit of $4.7 million and a bottom-line loss of $5.3 million, built on revenue of $12.3 million. The loss was attributed to one-off costs associated with the company's IPO, listing fees and acquisition costs.

However, on a pro-forma basis which assumes the group's core businesses, including Surfdome and Swell, were acquired in July 2012, SurfStitch has posted a 23 per cent surge in revenue to $103.6 million for the six months to the end of December.

The result, which also excludes figures from Billabong-managed sites that are being transitioned back to Billabong, was buoyed by a 40 per cent revenue boost in the Asia Pacific division and 16 per cent in Europe. These regions comprise SurfStitch's biggest markets.

SurfStitch also lifted second-quarter revenue from its North American business, Swell, by 13 per cent after a slow first quarter under Billabong's ownership ahead of the buyout. Revenue in the Americas was up 7 per cent across the half-year.

SurfStitch has also squeezed more from its sales, recording gross margins of 46.9 per cent, up from 44.5 per cent the previous corresponding period.

Group EBITDA jumped 160 per cent to $3 million, while the bottom-line profit landed at $273,000 up from a $1.38 million loss a year earlier.

The profit growth has been achieved despite significant integration costs associated with the acquisition of Swell from Billabong in September and the UK-based Surfdome in November.

The acquisitions have positioned SurfStitch, which was founded by Lex Pedersen and Justin Cameron in 2007, as the world's leading online action sports store attracting 58 million visitors a year.

Cameron is chuffed with how the company has performed since Billabong's majority stake was bought out in September. He says the business strategy implemented since then has delivered strong growth despite the integration focus on the business.

Cameron says while SurfStitch has been through significant changes following the Billabong separation, the focus will remain on growth which has prompted the directors to refrain from paying an interim dividend.

"We think the opportunity for our business in the global context is significant," Cameron says. "We operate in a niche market of action sports of over $18 billion with the shift to online accelerating. We are driving trends well above market and we expect to continue to do so."

Cameron says many of the company's competitors recorded single-digit growth over the same period.

SurfStitch is targeting full-year revenue of $199 million and EBITDA of $5.1 million, in line with prospectus forecasts. It says January and February trading indicates accelerating growth in its key regions.

As for competitive pressures, Cameron says these vary between its global regions with the Australian market largely confined to competition from Billabong's bricks and mortar operations City Beach and Surf Dive 'n' Ski.

In Europe, the merger with Surfdome has make SurfStitch the largest online retailer in the market there, while in the US Swell is the largest online retailer in its category. Cameron says bricks and mortar retailers such as Zumiez are the immediate competition.

"We see a significant opportunity to cannibalise those bricks and mortar dollars in the US," he says.


Author: Nick Nichols

Latest News

INTEREST IN RETAIL PROPERTY SPIKES AS INTERNATIONAL BRANDS LOOK TO ROLL OUT IN AUSTRALIA

AN influx of international retail brands into Australia over the next five years are expected to push up demand for f...

MANTRA BOASTS OF SUCCESSFUL HOTEL INTEGRATION AS NET PROFIT GROWS 15 PER CENT

MANTRA Group (ASX:MTR) CEO Bob East has praised the performance of the company's new Honolulu Hotel as it posted ...

WHITEHAVEN TRIPLES EARNINGS, PAYS DOWN DEBT AFTER COAL PRICE TURNAROUND

THE HIGH coal price has allowed Whitehaven Coal to triple earnings and pay down a large portion of its debt in the fi...

BABY BUNTING BUOYED BY CLICKS AND BRICKS PERFORMANCE

BABY Bunting has grown sales 18.1 per cent to $135.1 million in the first half of FY17, sweetened by the opening o...

Related News

WHY EMPLOYEE-OWNED COMPANIES ARE BEATING ASX200 SHARE PRICES

EMPLOYEE-owned companies command a higher share price than their publicly listed peers, reaping a 17 per cent prem...

RISE OF THE MACHINES HAS WORKERS SWEATING

UP TO 3.8 million Australian workers are fearful their job may soon be terminated by a robot, a new survey has shown....

LESS TALK, MORE SMALL BUSINESS ACTION IN 2017

THE future growth and prosperity of Australian SMEs could be undermined if governments lose sight of the sector...

TEST DRIVE A POST GRAD AT BOND

THERE'S only one way to really move your career into the fast lane, says Bond University, and 'test driving...

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter