Should You Buy Billabong International Limited Shares Today?

What Happened to the Billabong Share Price?

Billabong International Limited [ASX:BBG] drifted lower today. By 1:08pm, the stock had already retreated 3.52%, trading at AU$0.618 a share. Oil climbed higher overnight, but there were losses in the industrials and financials which helped to drag the whole market lower. Heavyweights such as Telstra, BHP and Rio were quite flat, which meant the market lacked any upward momentum.

Why Did This Happen to BBG Shares?

The global apparel brand Billabong is one of those out-of-favour companies that is waiting for a major turnaround. The stock went from a high of $18 in 2007 to $0.618 a share now. The consensus among the many analysts who cover the stock is that sales will be higher in the coming years.

The major problem with Billabong is that it hasn’t made money in three years. In fact, the latest result showing a net profit of $13.8 million is the first profit in three years. Last year’s result was a loss of $126.3 million.

For Billabong it is all about a turnaround strategy. So far, it seems to be working. The company will focus on direct-to-customer strategies and multiple platform strategies going forward.

What Now for Billabong International?

It is encouraging to see a better performing Billabong in the challenging global economic environment right now. The company’s main US market saw very marginal growth for the region, but great growth for the Billabong brand.

The CEO of Billabong, Neil Fiske, is responsible for delivering the ‘significant’ turnaround story investors are waiting for. Even he acknowledges the fact that ‘there remains though significant operation reform to be undertaken’.

For retail brands, lacklustre demand on the consumer side will undoubtedly impact the results. For investors, the decision becomes rather simple: ‘Is it too early to buy into Billabong’s turnaround story?’

The truth is investors still need to see more solid signs of a turnaround. In addition, the current headwinds facing consumer brands are another reason to avoid ‘weak’ companies such as Billabong.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor


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