Pac Brands looks to beef up
Speaking late last month, Pacific Brands CEO Paul Moore said the acquisition of the Globe casual apparel business, for which it had set aside around $42 million, would give Pacific Brands an "excellent platform for other bolt-on acquisitions and licenses in the outerwear category".
Subject to several completion conditions, the Globe brand buy-out is expected to include the Mossimo, Stussy, Paul Frank, Mooks, M-ONE-11, Freshjive and Independent labels. However, the Globe, Gallaz and Sandolls brands, the PSC skateboard chains and Globe's skateboard hardgoods business were exempt from the agreement.
Speaking exclusively to Ragtrader, Pacific Brands investor relations manager Katherine Cooper said the ASX-listed group was still on the hunt for relevant acquisitions across all categories.
"We're actively seeking brands that are strong, heavily-branded and innovative - brands that will enhance our current distribution channels."
Cooper said this could mean buying international licensed brands, proprietary brands or "whatever fits".
"There is always something on the table. We have dedicated people looking at acquisitions but when the next announcement will be, we can't say. We looked into acquiring Sheridan [bought last year for $61.8 million] for 18 months before the time was right to buy."
Cooper admitted the decision to purchase Globe was intentionally designed to bolster the group's flagging outerwear business.
"Previously our outerwear business was weak, consisting of low-profile brands like Amco and Lightening Bolt. We needed to do something to strengthen our portfolio in that area."
The new lifestyle brands would provide a good fit with the street-savvy Everlast brand and Merrell footwear brand, acquired last year, according to Cooper.
Moore stated that Pacific Brands would invest further in growing the consumer awareness of the newly acquired brands.
"It will increase our representation in the premium and specialty retail channels. In addition, it has a small, but growing, underwear business which will fit very well as a premium offering complementing our more mainstream underwear brands," he said.
At last month's Pacific Brands Annual General Meeting, Moore downplayed the company's sturdy financial performance for the financial year ending 30 June, 2006.
"It didn't meet the high expectations we had set ourselves," said Moore, who attributed this to a "patchy" retail environment.
The company reported sales of $1.62 billion, up 6.8 per cent from a year earlier, while net profit was up just 0.3 per cent at $101.2 million after tax.
Pacific brands also announced that it would slash its catalogue by up to 20 per cent in the next two years.
Moore said that the "tightening of product range" would be crucial for 2007 growth given the prospect of a slow Christmas period, possible interest rate hikes and increased labour costs in its manufacturing hub, China.
The outerwear and sport category, currently the weak link in the multi-brand chain, posted a 2 per cent year-on-year sales downturn, despite improving earnings by 8.3 per cent on the previous financial year.
Footwear, however, continued to deliver excellent results with branded sales posting a 6.5 per cent improvement. The category was buoyed by sports footwear, in particular by the recent relaunch of the "good old" Dunlop Volley to the youth market.
Branded sales in underwear and hosiery dipped 3.6 per on last year, which Moore attributed largely to heavy discounting in the category and excess stock problems.