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Billabong's Wipeout: Surfwear Brand Now Worthless

Over the past six years, Billabong has erased billions of dollars in investor value. Its latest year-end financial report delivers the worst news yet.
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Forty years ago, when Gordon Merchant founded surf apparel brand Billabong at his kitchen table overlooking Australia's Burleigh Point, one of the world's top surf spots, he could scarcely have imagined that by 2007 his Billabong stock would give him a net worth of close to a billion dollars.

Similarly, in those heady days before the financial crash, he could hardly have guessed that his company, then valued at A$3.8 billion, would be all but worthless just six years later.

Billabong reported its financials for the fiscal year ending June 2013 today, and the news was bleak. The company registered a net loss of A$859.5 million ($772.4 million in U.S. dollars), far beyond its previous year's loss of A$275.6 million. The carrying value of its brands fell to A$90 million from A$383 million at the end of June 2012.

In perhaps the most depressing line item of the 156-page year-end report, the company admits that its core brand, Billabong, valued at A$252 million just one year ago, now has no worth at all.

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Billabong was once a leading surfwear retailer. Its iconic black-and-white wave logo could be seen from the Space Coast to the Gold Coast, on surf gear worn by amateurs and professionals alike. But after the crash, consumer interest in Billabong and its 12 other brands declined. Many of its retail stores performed below expectations and had to be closed. In the most recent fiscal year, profits fell in Europe, the Americas and Australasia, a geographical region encompassing Australia, New Zealand, Asia and South Africa.

"It probably isn't cool any more for the youth of today to wear Billabong," Todd Guyot, an analyst at investment bank Moelis & Co. who lives in Sydney, told Bloomberg News. "You can see how much the core business has deteriorated over the last few years."

Since the end of fiscal year 2013, Billabong has managed to sell its DaKine sportswear brand to Altamont Capital Partners for A$70 million. Altamont, working with GSO Capital Partners, is one of two consortiums that have offered refinancing deals to Billabong, saving the beleaguered company for the time being.

"Liquidity has been secured and we are within weeks of finalizing our long-term funding arrangements," Billabong chairman Ian Pollard said in a statement. "Our shareholders, our staff and our various business partners can be confident that we have a strong future following the most challenging period in the company's history."

Billabong's stock closed on the Sydney exchange on Tuesday at A$0.54 a share, down 5.3 percent on the day.

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