Surfwear maker Billabong international Limited (ASX: BBG), could be about to hit the headlines, with the company exploring options for its 51% stake in online retailer SurfStitch.
According to Fairfax media, SurfStitch is hosting fund managers at its Gold Coast headquarters this week, as it looks to buy out Billabong's stake and potentially list on the ASX as a separate entity.
The newspaper reports SurfStitch could be worth as much as $300 million to $400 million, valuing Billabong's stake at over $150 million at a minimum. That's around 40% of the company's current market cap.
The surfwear maker launched a turnaround strategy in February this year, which is focused on its big three brands, Billabong, Element and RCVA. At the same time, the company announced a strategic review of its online brands SurfStitch and US online retailer Swell.
In the last half year, it reported a statutory loss of $126 million, which included a cartload of one-off items. Excluding those items, the company reported a small net profit of $6.3 million.
Billabong has plenty in the works, as it attempts to turnaround its struggling retailing businesses.
Billabongs has sold off some non-core assets such as West 49, it is changing its marketing and distribution model in a number of countries, and restructuring and downsizing its existing workforce.
Net debt stood at $175 million, so a sale of the online retail businesses SurfStitch and Swell could see the company become debt free, and real profits and dividends may not be far away.
It's a similar path to that of Pacific Brands Limited (ASX: PBG). The owner of brands such as Bonds and Hard Yakka has seen its share price dive over the last seven years by 86%, but PacBrands is slashing costs and has improved its sales in recent times.
While it may be too early to suggest both retailers are definitely turning around, much of the best gains can be achieved in the early stages of a turnaround – it's a high risk/high (potential) reward proposition.
