A 40-Year-Old Surf Company Declares Its Brand Is Worthless

It’s a literal wipe-out for Billabong, a venerable surf company founded 40 years ago on Australia’s Gold Coast by a pair of entrepreneurs who designed their first board shorts on a kitchen table. By writing down the value of its namesake and Element brands to zero after another year of astonishing losses, Billabong signals that it considers them worthless.

The unusual move follows what acting CEO Peter Myers says has “clearly been a tumultuous year.” Myers assumed the chief executive job after the resignation of Launa Inman, whose departure, and unclear successor, only complicated the situation for Billabong. Financial filings made this morning show the company’s latest annual loss ($773 million) was more than three times the size of its market capitalization ($229 million), and sales declined 13.5%.

Billabong is one of Australia most widely known retailers, a supplier of gear found on beaches around.  After establishing a cult following at home, Billabong’s Gordon and Rena Merchant expanded overseas in the 1980s and 1990s, riding the wave of increased interest in professional surfing and Australia’s surf culture. Billabong went public, listing in Australia, in 2000 and went on a shopping spree, buying brands like skateboard company Element and Nixon watches. The acquisitions propelled Billabong to a peak valuation of $3.45 billion in 2007. That year Billabong made $150 million on $1.1 billion in revenue.

Just a few years later, Billabong was selling off Nixon–and struggling to stay above water. The company earlier this year agreed to a $294 million refinancing deal with private equity shop Altamont Capital Partners, and is considering a rival offer made by Oaktree Capital Management and Centerbridge Partners. It has also been mulling various takeover offers. Indeed, the rough seas around Billabong make struggles at other retailers with brand-image problems, like Abercrombie & Fitch and J.C. Penney, seem smaller in comparison. In the States, Billabong competes chiefly with PacSun and also with chain retailers like Target TGT +0.31% and Gap GPS -0.38%.

Overall, Billabong estimates its brands are worth just $80.7 million today, down dramatically from $343 million a year earlier. Much of that decline came from Billabong writing its namesake brand down to zero from $252 million.

After 40 years, the company looks like nothing more than flotsam or jetsam.

Source: Forbes