Surfstitch suffers profit downgrade, closing North America business

By

Benjamin Fitzgerald

Published
May 22, 2017

Surfstitch reissued its full-year profit guidance on Monday, warning that losses would double to between A$10.5 million and A$11.5 million in the 12 months ending June.

​The Australian online surf and apparel retailer lowered its underlying EBITDA loss for full-year 2017 to a range of $10.5m to $11.5m from range of $5m to $6.5m previously advised to market.

In a statement, the online retailer said it had significantly  progressed in reducing its costs and streamlining operations, and had successfully relaunched a new and improved website, Surfstitch.com.

Overseas operations, however, continued to face headwinds, particularly the UK, where the Australian firm's localised Surfdome business faced increased footwear and apparel sales pressure.

"The work to transform our business model; through improved operational capabilities, enriched customer engagement and a reduced cost base, is going well," said Chief executive Mike 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 added that it plans to shutter operations in its other key international market -- North America, transferring management of its Swell e-commerce platform to Australia by January 2018.

"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 infrastructure," Sonand said.

"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."

The latest guidance from Surfstitch is still an improvement on SurfStitch's underlying EBITDA loss of $18.8 million in 2016. In February, Surfstitch clocked an $8.3 million loss in the first-half period of 2017.