Embattled retailer Billabong has cut its full-year earnings outlook and announced a capital raising as it launches another effort to turn its business around.
The surf-wear company blamed continuing poor retail conditions in Australia, Europe and the United States for again lowering its profit outlook.
It now says it expects earnings before interest and tax for the 2012 financial year to come in between $130 million and $135 million, down from an earlier forecast of $157 million.
The company hopes to raise $225 million in a $1.02 per share offering at a 44 per cent discount to yesterday's closing price of $1.83.
The funds will help the company pay off some of its debt, but Billabong said it will still owe around $100 million.
In a statement, Billabong chief executive Launa Inman described the capital raising as a "vital step forward" for the company.
"It not only further strengthens the balance sheet, but also assists in continuing to execute on previously announced initiatives ...
with the right focus and execution, Billabong will once again become a growing, profitable business," Ms Inman said.
IG Markets market analyst Chris Weston says the capital raising's structure and the severity of the downgrade show the company is fairly desperate.
"They want to try and turn things around, face the future with a much more compelling balance sheet, I think that's really what we are seeing there at the moment," Mr Weston said.
"I think the downgrade really sort of signals the position these guys are in.
It's a pretty decent downgrade.
We saw one in December as well." And he says shareholders have very little choice in whether to participate in the raising, given its structure.
"It's a very tough position for shareholders to be in at the moment," Mr Weston said.
"You've not just got the fact that you're going to have to fork out more money, they've actually come out and downgraded their earnings again." Earlier this year, Billabong announced it would slash 400 jobs worldwide, close up to 150 stores and sell its Nixon watch brand.
In a note on the offer, City Index chief market analyst Peter Esho said Billabong shareholders would be seeing more pain as a result of the company's attempts to defend a $3 per share private equity takeover bid that now appears "generous".
Mr Esho also questioned the move to sell Nixon.
"It's hard to justify the sale of one of the best units in the group and then tap shareholders for equity only a few months later," Mr Esho wrote.
"Why sell the business if you need to raise?" Billabong shares were placed in a trading halt this morning before the announcement.