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TROUBLED online sports clothing retailer SurfStitch is considering selling off more of its assets and will close its US office as it expects its full-year loss to double.
SurfStitch on Monday announced that weak apparel and footwear sales in its key markets, particularly in the UK, will drag it deeper into the red than the $5 million-$6.5 million loss it had forecast in February.
The Gold Coast based company sells branded clothing and shoes, including Billabong, Quiksilver, Vans and Converse, online in Australia, Europe, the UK, the US and Japan.
In February this year, it appeared as if SurfStitch (ASX: SRF) was on a solid road to recovery from the disastrous losses it suffered in 2016.
However, large cracks have again appeared beneath the sports and fashion retailer's feet after it told the market today that its projected FY17 EBITDA range has almost halved from between $10.5-11.5 million to just $5-6.5 million.
On the announcement, the SRF share price plummeted 25.5 per cent and is trading at $0.07 as of 4:18pm AEST. SRF shares peaked in November 2016 when they reached $2.09.
CEO Mike Sonand says SurfStitch has experienced intense margin and sales pressure, especially through its UK business Surfdome, which has deteriorated its full year guidance.
"The work to transform our business model; through improved operational capabilities, enriched customer engagements and a reduced cost base, is going well," says Sonand.
"However, the retail environment has made it difficult to deliver the planned sales and gross margin improvements as quickly as we would like, resulting in the revised forecast for the Group's underlying EBITDA."
SurfStitch share price history since Nov 15
SurfStitch also announced it will no longer maintain an operating infrastructure in North America for its subsidiary SWELL platform, even though it will continue to sell product on the continent.
Sonand says the North American market is simply no longer profitable, and that management of SWELL will transfer back to SurfStitch's Australian team.
"Although considerable progress has been made in arresting losses in North America, the region will continue to be unprofitable for the foreseeable future and so we have made the difficult decision to close our US operating structure," says Sonand.
"The new technology platform we have implemented in Australia will enable the SWELL site to operate in North America whilst being serviced and managed by our teams in Australia."
"These measures will provide for a greater focus on our two largest markets, Australia and the UK, and will materially reduce our operating costs, while still maintaining a consumer presence in North America."
The embattled brand is currently the subject of a class action lawsuit, brought by Quinn Emanuel Urquhart & Sullivan and funded by Vannin Capital.
The $100 million lawsuit is being launched on behalf of aggrieved shareholders who watched their shares plummet 85 per cent in 2016 following a string of profit downgrades.
Lead photo by Brocken Inaglory, Wikimedia Commons
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