SurfStitch is getting destroyed after posting a massive loss

Cameron Spencer/Getty Images

SurfStitch shares were almost cut in half after the online retailer posted a full year loss of $155.35 million.

A short time ago, the shares were down 47% to $0.12.

Revenue was up 143% to $237.95 million, mainly from acquisitions, but gross margins fell to 40% from 46%.

But the company booked a non‐cash impairment of goodwill and aged inventory of $99.3 million.

“The results are clearly very disappointing,” says aid CEO Mike Sonand.

“SurfStitch Group is fundamentally a great business, but the company has been through a period of rapid expansion, which has involved significant management time in effecting the relevant acquisitions and two major capital raisings.

“A focus on increasing market share, combined with difficult trading conditions (particularly in North America) had a major impact on retailing margins and overall results.

“The accelerated roll‐out of the eCommerce platform, planned global re‐branding and other initiatives had an impact on expenses and cash flow.”

The company is forecasting single digit sales growth for 2017.

Surfstitch’s management was restructured after the surprise departure of CEO and co-founder Justin Cameron in March. The company then said it understood Cameron was pursuing a potential acquisition of the business in conjunction with private equity. There has been no news since.

The company says the integration of companies acquired over the last year has been slower than anticipated and the benefits lower than expected.

In May last year, the retailer bought a surf weather site, Magicseaweed, and a global online news magazine, Stab Magazine, for $13.8 million cash and 4.8 million shares.

In November, SurfStitch bought action and extreme sport video producer Garage Entertainment, a local Sydney company, for $15 million in cash and shares.

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