Total Wipeout: Why the Surfstitch Group Ltd share price is getting hammered today

The Surfstitch Group Ltd (ASX: SRF) share price has been whacked once again following another earnings downgrade this morning.

The company started out on a positive note, saying it has made “substantial progress” with its plans to reduce costs and streamline operations, as well as transferring its core website to a new platform. But it was only a matter of time before the company got to the heart of its message.

“…the general business environment for apparel and footwear has been very difficult in each of the Group’s key markets, particularly in the UK, where the Surfdome business has experienced intense margin and sales pressure.”

The result was another deterioration in the group’s full-year earnings forecast. It now expects to report an earnings (EBITDA) loss of $10.5 million to $11.5 million for the full year, compared to previous guidance of a $5 million to $6.5 million loss.

This was the message from the group’s CEO, Mike Sonand:

‘’The work to transform our business model; through improved operational capabilities, enriched customer engagement and a reduced cost base, is going well. 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.”

The Surfstitch share price has now plummeted nearly 82% over the past 12 months, including a 16.3% decline today. Although there was plenty to like about the business initially, investors would be wise to steer well clear today.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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