After a week on the Gold Coast, it’s very hard to believe that surfwear giant Billabong could be in trouble. Every second person — man, woman, child — seems to be wearing a Billabong shirt or pair of boardies.

And yet it’s hard to get past the idea that there is something rotten at the heart of Billabong after private equity firm TPG became the second such firm to walk away from a potential takeover bid in the space of a few weeks.

TPG and the other firm, Bain, have looked at Billabong’s books and seen something very ugly. But what is it?

The first theory, and the one that investors fear most, is that there is some major problem with Billabong’s business that the company has yet to tell the market about.

It’s the natural reaction to the news that TPG and Bain have both walked away and chief executive Launa Inman has possibly made a mistake by not talking about the reasons behind TPG’s withdrawal on Friday — her silence certainly doesn’t kill the speculation.

But surely we need to give Inman the benefit of the doubt here — if there were a specific problem, Billabong would have to tell the market about it, particularly given the fact it is under so much scrutiny right now.

Instead, the company very deliberately said that it remains on track for underlying earnings of $100-110 million for the 2012-13 financial year, compared with $84 million last year.

Of course, that result will be driven by cost-cutting more than growth. And that’s the second theory behind the TPG withdrawal — the private equity firm that made a motza fixing up and flogging off Myer couldn’t see a way to turn Billabong around in a reasonable time frame.

To me, that’s the likelier theory. While TPG would certainly have no problems ripping costs out of Billabong, the firm just might be telling us that actually getting any growth out of Billabong will be a difficult and lengthy process.

Launa Inman has admitted as much with her three-year turnaround strategy. Inman and the Billabong board believe it can produce two-and-a-half times the$84 million the company made in 2011-12, by “simplifying the business, investing in key brands, building the global eCommerce platform and the globalisation and integration of the supply chain” — but it won’t happen until 2015-16.

That’s long enough for suffering Billabong investors. But what TPG seems to be saying with its decision to withdraw is that Inman’s plan could take longer than that.

This is not necessarily because Inman’s plan won’t work — but it might suggest that TPG believes the retail environment will remain weaker for longer than anyone expects.

There are two things to take out of that. Firstly, Launa Inman has a huge job ahead of her. While the withdrawal of TPG means she can now focus her team 100% on the turnaround rather than worrying about takeover bids, the challenging retail environment and the mess she has been left by previous management will make her job very difficult.

Secondly, TPG’s withdrawal underlines the fact that retailers face a long, hard road back to good growth.

There are no magic tricks here. Retailers — even those with brands as strong as Billabong’s — must simply adjust their business as best they can, focus on the customer and dig in for a tough few years.

*This article was originally published at SmartCompany