Underwear sales give PacBrands fantastic lift

THE 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 its new chief executive, John Pollaers, spins stronger underwear and bra sales.

However, the company has begun 2013 with mixed results. Underwear sales are stronger, but workwear sales are weaker as a retreat in government spending and resources projects strips Pacific Brands of sales.

Mr Pollaers, formerly the chief executive of Foster's, said restoring Pacific Brands to growth was a top priority. This would be achieved by focusing on its key brands, such as Bonds, Berlei and Jockey, and diversifying its channels to market, including selling brands at its own stores and selling wholesale.

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

On Monday, Pacific Brands 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 is the first interim profit in three years.

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

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

Sales for the first half were down by 6.6 per cent but the earnings per share were up by 10 per cent, at 4.3¢, helping to generate a 25 per cent increase in the interim dividend to 2.5¢ a share.

There was growth in underwear sales, backed by Bonds, Berlei and Jockey, and the reported sales for the division were up by 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 sales, covering brands such as Hard Yakka and KingGee, continued to be the problematic area. The group suffered a cyclical downturn in market conditions. Sales fell by 9.1 per cent to $176.8 million; pre-tax earnings reached $18.8 million, an increase of 2.2 per cent, but it was 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 characterised by low business confidence and slow employment growth, 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.

Its shares gained 2.5¢ to 75.5¢.