Surfwear firm Billabong faces class action

Agence France-Presse

Posted at Mar 06 2014 03:35 PM | Updated as of Mar 06 2014 11:35 PM

SYDNEY - Embattled Australian surfwear firm Billabong said Thursday it would defend itself against claims it misled investors by issuing strong earnings guidance just months before its share price plummeted.

Law firm Slater and Gordon said it was preparing a class action on behalf of hundreds of disgruntled investors seeking compensation from Billabong over its alleged failure to comply with continuous disclosure obligations.

"Our clients allege that Billabong misrepresented the assumptions on which the FY12 earnings growth guidance was based," said senior associate Odette McDonald.

The case focuses on Billabong's August 2011 forecast of strong earnings growth in the 2012 financial year.

By year's end the brand had withdrawn that guidance and revealed its earnings would suffer a substantial fall, a revelation which prompted Billabong's share price to dive more than 50 percent within days.

McDonald said the firm had said that achieving the forecast depended on internal initiatives, such as achieving synergies between its newly-acquired retail outlets, and increasing the proportion of total revenue from Billabong products.

"However, it is alleged that, in reality, Billabong's growth guidance required an extraordinary lift in overall sales revenue during an extremely challenging retail environment," she said.

McDonald said her clients would allege that Billabong's internal initiatives had "no viable chance" of lifting profit margin substantially.

"They further allege that, had the market been informed of the true dependencies underpinning the earnings forecast, it would have disregarded the guidance as unrealistic, and this would have been reflected in Billabong's share price," she said.

Billabong said in a statement that it had not been contacted by Slater and Gordon, or served with any proceedings, but was aware of reports about the possible class action.

"Billabong will vigorously defend claims of the nature described in those reports, which relate to events that occurred more than two years ago," it said.

The troubled firm has been the subject of multiple failed takeover bids in recent years, with its shares hitting a record low of 12 cents in June 2013 as it battled a prolonged rally in the Australian dollar and muted consumer confidence in its key US and European markets.

After posting a Aus$859.5 million (US$774 million) annual net loss last August, it appointed a new director and accepted a refinancing deal worth more than US$500 million from US investment firms Centerbridge Partners and Oaktree Capital Management.

Its shares ended 1.63 percent lower Thursday at 60.5 cents.

© 1994-2014 Agence France-Presse