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Pacific Brands revives with $38m profit

19 Feb 2013 THE AGE - ELI GREENBLAT



APPAREL and homewares wholesaler Pacific Brands is on track to post its first full-year reported profit in three years, free from blemishes of the more than $1 billion in write-downs and restructuring costs booked to date, as new boss John Pollaers spins stronger underwear and bra sales.

But the company has started 2013 with mixed results. Underwear is up but workwear is down as a pull-back in government spending and resource projects strips Pacific Brands of customer sales.

Mr Pollaers, formerly the chief executive of brewer Foster's, said restoring Pacific Brands to growth was a top priority and this would be achieved through a strategy of focusing on its key brands, such as Bonds, Berlei and Jockey, while also diversifying its channels to market which included selling brands at its own stores and also wholesaling to customers.

"Some initiatives will take time to have a visible impact on reported results and further performance improvement is required," Mr Pollaers said.

Pacific Brands on Monday posted a net profit of $38.9 million for the first half, against a loss of $336.5 million in the previous corresponding period. Importantly the result was clean, with no significant items like profit-crunching write-downs, and the first interim profit in three years.

Mr Pollaers would not be drawn on guidance for the full year but while group sales were down marginally since January, Pacific Brands is likely to make a profit for 2012-13.

Pacific Brands has racked up $1 billion in write-downs and related charges since 2009 when the company went through a near-death experience in the wake of the global financial crisis, and in 2012-13 is cycling $502.7 million of non-cash write-downs.

Sales for the first half were down 6.6 per cent but earnings a share was up 10 per cent to 4.3¢, helping to drive a 25 per cent lift in the interim dividend to 2.5¢ per share.

There was growth in underwear, backed by Bonds, Berlei and Jockey, as reported sales for the division were up 1.4 per cent to $220.4 million. Reported pre-tax earnings for the division were $38.8 million against a loss of $360.7 million previously.

Workwear, covering brands such as Hard Yakka and KingGee, continued to be the problem child for Pacific Brands.

It was hit by a cyclical downturn in market conditions, sales fell 9.1 per cent to $176.8 million and pre-tax earnings hit $18.8 million, an increase of 2.2 per cent but a fall of 3 per cent before significant items. "The workwear group remains a global leader in an attractive industry. While it is clearly not immune to the current cyclical downturn . . . it has generally maintained market share and it has opportunity ahead of it when we see a return of business confidence in its markets," Mr Pollaers said.

Shares in Pacific Brands rose 2.5¢ to 75.5¢.