Stocks of Billabong International Limited (ASX: BBG) fell 34 per cent after the Gold Coast firm forecast lower earnings for the first half of the financial year and issued a profit downgrade due to the chilly summer weather.

Besides the cold, wet summer across Australia, Billabong pointed to slow sales in Europe, a late start to the winter weather in the northern hemisphere and tough trading conditions in North America as the reasons for its low earnings.

From Dec 1-4, the temperature in Melbourne did not go up beyond 21 degrees which makes it the coolest summer since 1987, according to Weatherzone senior meteorologist John Fisher.

"The reasons for the sales slowdown vary by region, but the data received reflects the European sovereign debt issues and the ensuing fears of global recession which are impacting consumer confidence and spending patterns significantly," Billabong said in a statement.

Swimwear and shoes sales were hit hard in summer, said Australian Retail Association Executive Director Russell Zummerman.

Billabong forecast up to 26 per cent drop in its first half earnings which sparked selling of shares and led to stock prices dropping up to 16 per cent in early trade. The company's stocks traded for $1.81, the lowest level since Billabong was listed in August 2000 and almost half the value of its issue price of $3.15.

Since the start of 2011, Billabong shares shed over 75 per cent of its value.

Analysts pointed out that traders and funds react generally on the first trading day while retail investors react to company developments usually from the second day. IG Markets strategist Stan Shamu said Billabong stocks may recover later if the selling momentum subsides.

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