Billabong’s broken dream

May the surf be flat and cold. May your wetsuit zipper get stuck. May your surfing trip to Bali be delayed.

I’m no surfer but I do hope investors in stricken surfwear company Billabong are preparing their best surfing-related insults ahead of the company’s annual general meeting in November.

Billabong’s board deserves to be absolutely savaged for allowing one of Australia’s great global brands to decay and for mismanaging a business that has seen its market value fall from $3 billion to $650 million.

New chief executive Launa Inman yesterday announced a $275.6 million loss and unveiled a restructuring plan that said more about the previous management team than it does about her.

As today’s excellent piece from LeadingCompany’s Kath Walters explained, one of Inman’s first tasks will be to revitalise the core Billabong brand, which Inman says has great brand equity but is tired.

That’s partly because former chief executive Derek O’Neill decided in his infinite wisdom to cut the company’s marketing spend in the face of falling revenue – only to see sales fall further and the brands damaged.

Inman will now start collecting data on customer engagement and satisfaction, which begs the question whether the previous board and management really knew the market it was selling to.

Then there are the actual products Billabong sells. Inman plans to cut the company’s range by 15%, because just 22% of the styles on offer generate 80% of the sales. Inman will also slash the company’s supplier base by 35%, because 85% of the things Billabong sells come from just 19% of its suppliers.

These are staggering numbers. Were the previous management and board not across this data?

Then there’s retail. Inman wants to clean up the company’s stores which, from the photos Inman used in her presentation, look like relics from the past – cluttered and ugly. You have to wonder whether management have actually visited shopping centres recently. If they had, they would have noticed that this little brand called Apple has changed the way stores are laid out, with minimalist, clean store design now all the rage.

Inman’s plan looks pretty good. There’s nothing radical there, but it does focus on the basics of retail – know the customer, focus on the brand, simplify the business as much as possible.

But executing the plan won’t be easy, simply because of what Inman has to work with – a management team that seems to lack the systems, processes and knowledge to manage what has become a very complicated multi-brand, multi-channel operation.

Inman was yesterday careful to say that she wanted to preserve Billabong’s culture and specifically mentioned the “entrepreneurial” way the business had been run.

Retaining Billabong’s reputation as surfing experts is a good idea, but on the evidence presented in her turnaround plan, there’s probably very little to preserve in terms of management culture. Indeed, it was hardly a surprise that Inman highlighted the new executives and consultants she has brought on board.

Inman will need to do this her own way and a bigger management cleanout may well be in order, and she will also need to work hard to keep takeover discussions with private equity firm TPG open.

If TPG does swoop, Inman’s time at the top will be short but sweet – her salary package was yesterday revealed to be $3.32 million, including $252,000 for her first month-and-a-half in the job and a potential $1.3 million bonus.

Billabong also revealed sacked former chief Derek O’Neill walked away with a payout of $2.95 million, including a $2.51 million payout.

That’s angered investors, and rightly so. O’Neill, departing chairman Ted Kunkel and board members Tony Froggatt, Allan McDonald, Paul Naude, Colette Paull, Sally Pitkin and founder-director Gordon Merchant should hang their heads.

Yes, Billabong has been hit by structural change. But Launa Inman’s turnaround plan has exposed a board and management team that simply didn’t do the basics right.

James Thomson is a former editor of BRW’s Rich 200 and the publisher of SmartCompany and LeadingCompany.