Posted on: Monday, March 11, 2002

Billabong catches big wave of surfwear

Bloomberg News Service

SYDNEY, Australia — For Kane Leclere, being cool means wearing Billabong International Ltd.'s latest surf gear — even though it may never actually see any action on Sydney's beaches.

"It's fashionable," said the 10-year-old, sporting a bright yellow cap and blue T-shirt emblazoned with the brand name. "Most of my friends wear them," said the boy, who surfs only "a little bit."

In a market as fickle as teen fashion, that kind of free advertising pays dividends — and helps explain why Billabong shares doubled in 12 months.

"Billabong has been a huge success," said Robert Patterson, managing director of Argo Investments Ltd.

Billabong is getting a boost from the increasing popularity of extreme sports, added Phillip Zammit, an analyst at Macquarie Equities Ltd., who has an "outperform" rating on the stock and expects it to rise another 8 percent this year. "We're seeing a bit of a swing toward beachwear products and away from Nike and team sports."

Their success is attracting attention. Nike Inc. is trying to break into surf apparel, and recently bought the teen clothing company Hurley International LLC, which makes T-shirts, cargo pants and board shorts.

Billabong, founded in 1973 by surfer Gordon Merchant and his wife, may have the edge in authenticity: Some of its senior executives go surfing in the morning before they go to work, noted one stock analyst.