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BoD proposes sale of Hot Tuna brand

15
Nov '11
Hot Tuna, leading surf wear and street wear brand is providing a trading and business update.

Overview
Revenues for the year ended 30 June 2011 will be in line with the Board's expectations. As a result of the Board's continued focus on costs control during the financial year, losses will be below that previously expected by the board.

Sales during the first four months of the current financial year are 65% ahead of the comparable period for last year with an improved gross margin. Overheads are higher than last year as the Company has funded the design and launch of its website, strengthened its management team, increased PR and marketing to stimulate both revenue growth and increase brand awareness.

UK
The winter merchandise was delivered to the UK, in accordance with its specification, from our new supplier in Sri Lanka. The Amazon orders were delivered on time and the range was added to our on-line offering on 20th October 2011. Detailed assessments versus our major competitors confirmed that our merchandise compares favourably in terms of quality, design and price.

Traffic to our website, (which was launched on 22nd September 2011) is building well having been up 29% in the last week of October (versus the prior week) and a further week on week advance of 23% in the first week of November. However to date, conversion rates are disappointing and we have therefore lowered our forward sales forecasts from this channel.

In light of the ongoing difficult retail conditions in the UK, trade sales to multiple and online retailers for spring/summer 2012 are currently lower than hoped, or late in being confirmed. We are flexing our production planning accordingly.

Europe
Whilst spring/summer 2012 orders from our distributors in Italy, Austria, Germany and Denmark are ahead of last year, they are currently below budget.

Australia and South East Asia
Trade sales to independent retailers continue to show good growth and expectations for November are strong relative to last year. Online interest has been encouraging and we are launching an Australian web store later this month.

As announced in the trading update on 5 October 2011, the Company anticipates that its Australian distributor agreement should be signed this month. Sales projections by our distributor partner are very encouraging.

In conjunction with our prospective new Australian distribution partner, we see a great opportunity for Hot Tuna in South East Asia. Brand IP is being documented country by country prior to negotiating new distributor deals.

USA
The restructuring of our US operation is also close to being concluded with our commercial office and warehouse due to close as soon as all stock is cleared. Distributor discussions in the US are on-going with a view to appointing distribution partners early in 2012.

Online interest in the US has been encouraging with over 6% of visitors to coming from the region. We will activate a price change facility onto our website this month, which will allow USA customers to view all our prices in $US.


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