Embattled clothing group Pacific Brands has emerged out of the red, revealing a positive profit result for the first half of fiscal year 2013.
The company, responsible for brands such as Bonds, King Gee and Diesel, posted a profit loss of $356.4 million for the same period last year.
This year, however, the operation has fared a little better, recording net profit after tax of $38.9 million for the six months ended December, 31 2012.
Sales were still down, by 6.6 per cent, affected by weak workwear demand, with homewares also marginally down in difficult markets.
Underwear, however, showed encouraging growth, according to CEO John Pollaers, driven by brands such as Bonds, Berlei and Jockey.
“There is still plenty of work to be done to stabilise sales performance and return the business to sustainable growth. It is early days, but we are encouraged that the underwear group returned to growth in the period, with Bonds, Berlei and Jockey all up. It shows that good results can be obtained from strategic focus, discipline and investment in great brands,” he said.
“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.”
Individually, by category, underwear reported an increase in sales of 1.4 per cent, to $220.4 million, with reported earnings before interest and tax of $38.8 million, up from a loss of $360.7 million.
Key brands (Berlei, Bonds, Jockey, Explorer and hosiery brands) represented 85 per cent of underwear sales and grew by $15.17 million or 8.8 per cent.
By comparison, workwear saw sales drop by 9.1 per cent to $176.8 million.
Homewares, footwear and outerwear reported a drop of 18.9 per cent in earnings before interest and tax to $12.0 million.
Sales in boutiques were up, but Sheridan’s sales were marginally down overall due to reduced concession sales and clearance volumes.
Key premium footwear brands Clarks, Hush Puppies and Julius Marlow were all up, but the footwear and sport category was down overall due to declines in portfolio brands (Grosby, Dunlop, Slazenger).
Going forward, Pollaers said Pacific Brands will focus further on strategic priorities to stabilise sales and deliver sustainable growth over time.
These will include: investing in core brands for sustainable wholesale growth, growing direct-to-consumer channels, investigating adjacent category opportunities, developing international business, strengthening its distribution platforms, and accelerating growth through acquisitions.
“Some initiatives will take time to have a visible impact on reported results and further performance improvement is required. However, in my short time here I can already see traction in the initiatives we are taking,” Pollaers said.
Looking ahead, Pollaers added that second half-to-date underlying sales performance continues to be mixed with underwear up, workwear down, homewares, footwear and outerwear down, and the overall group marginally down compared to the previous corresponding period.
Overall, it is expected that gross margins and costs of doing business will be broadly in line with the first half 2013 results.
According to the company, earnings outcomes will be largely dependent upon market conditions, associated sales performance and implementation of the new strategy over time, and may be impacted by ongoing restructuring and rationalisation.
However, Pollaers said he remains confident that the company is well placed to deal with the continued challenging trading environment and to benefit from any improvement in market conditions.