The decision by Pacific Brands to exit workwear, just seven years after acquiring Hard Yakka to sit beside its existing King Gee brand, makes sense.
The sale of the business to Wesfarmers for $180 million not only brings in much-needed cash to salve Pac Brands’ ailing balance sheet, it also frees management to focus on higher-growth areas such as its Sheridan bed linen and Bonds clothing businesses.
While something of a standout performer during the mining boom, workwear has been a drag on performance in more recent years, including a loss of $247m last financial year as the company wrote down the value of goodwill and a broad portfolio of brand names.
But while Australia’s shrinking manufacturing sector is undoubtedly a factor in Pac Brands’ decision, there were always going to be better margins in selling to consumers than to business.
Workwear is certainly more comfortable, and possibly even more fashionable, than in past
decades, but the simple truth is that companies buying overalls for staff do not have the same emotional investment in the product as a young couple choosing bedsheets to put on their wedding registry.
Accordingly, a manufacturer will happily outfit their workers in a no-name product from China (which is also where Pac Brands’ stuff is made) if they can save 5c on every garment.
Not so shoppers buying undies and sheets. They have to be comfortable and they have to look right, and most people make that choice on the basis of brands they know and trust, and for which they are therefore willing to pay a little extra.