Surfstitch drowns one litigation

Dimitri Sotiropoulos

29th Nov 2017

Embattled surfwear chain Surfstitch has cleared one litigation swell, after resolving its case with the Three Crowns group of companies in an out-of-court settlement.

In a market update, administrators of Surfstitch Group John Park, Quentin Olde and Joseph Hansell of FTI Consulting said both parties “met in good faith and resolved the proceedings between them”.

“The Three Crowns group of companies and its officers have strongly denied each of the allegations made by SurfStitch in the proceedings and the court has not made any determinations in respect of the proceedings,” the administrators said.

“The terms of settlement involve no admissions of liability, the proceedings will be discontinued and an agreed settlement sum will be paid to Three Crowns.”

All commercial arrangements between the parties have now come to an end by agreement and Crown Financial Pty Ltd remains a shareholder of Surfstitch.

The terms of the agreement are otherwise confidential, with a spokesperson telling IRW that no further details would be announced over the settlement.

“The administrators consider it is in the best interests of creditors and members to resolve the litigation, with a view to achieving a measure of certainty in the company’s creditor position as it prepares to restructure its affairs when its administration ends.”

Earlier this month, FTI filed a request to the Australia Securities and Investments Commission asking for an extension of time to hold Surfstitch’s AGM, which was ultimately granted.

The retailer’s financial reporting deferral period now expires on 24 February 2018, meaning the company must hold its AGM by 24 April.

Surfstitch still faces the $100 million class action filed by Quinn Emanuel Urquhart & Sullivan on behalf of shareholders against the online retailer in May.

Choppy waters continue for retailers

IRW has previously reported Billabong International is understood to be assessing the purchase of Surfstitch, a business in which it was formerly the largest shareholder.

It’s also been rough waters for Billabong recently, whose overseas markets gave the surfwear retailer a boost, while APAC remains a problematic area for the Aussie retailer.

Addressing shareholders at the company’s recent AGM, Billabong chair Ian Pollard reported EBITDA for the year of $51.1 million was up 2.8 per cent on a constant currency basis, less than a million dollars below the guidance range provided at the 2016 AGM and affirmed again in February.

The APAC region dropped 28.3 per cent in EBITDA for the year while in the company’s largest region, the Americas, Billabong recorded 46.9 per cent EBITDA growth on a constant currency basis.

Billabong CEO Neil Fiske acknowledged that the retailer is digitally underdeveloped in the APAC market, at 1.9 percent of ecommerce sales compared with the Americas at 7.4 percent.

“This is a big opportunity for us,” he said.

“We have hired experienced leaders for both our mono-brand and multi-brand web businesses, staffed up the teams and we are investing much more aggressively this year to accelerate growth, especially in mobile.”

This article first appeared in issue 2168 of Inside Retail Weekly. To subscribe, click here.