Australian clothing giant Pacific Brands is axing 1,850 jobs, eliminating some of its labels, and closing its manufacturing facilities as part of a restructuring aimed at cutting annual costs by AUD150m by 2011.

The company, which owns brands such as Bonds, Holeproof, Kayser, KingGee and Yakka, has also secured an extension on AUD330m ($214m) of debt until August 2010.  

Chief executive Sue Morphet said the changes follow a 12-month strategic review and will "reduce complexity and cost" by focusing on the firm's best-selling brands. 

"Our top 20 brands provide us with almost two thirds of our sales," she said, adding that more than 200 brands account for just 2% of sales.

Of the 1,850 job losses planned in Australia over the next 18 months, by far the majority will be clothing manufacturing.

1,200 positions will be shed as the company carries out a complete sourcing overhaul, which will see most of its Australian factories shuttered.

"We have persevered where others have stopped manufacturing before us," Morphet said.

As well as closing seven Australian facilities, Pacific Brands plans to exit its manufacturing operations in Asia, but says it may divest them as going concerns.

Another 650 redundancies will be among non-manufacturing employees in Australia, spread across the entire business.

One-off costs of $110m will be incurred in the second half of 2009, with a further AUD15m across 2010 and 2011.

The changes coincided with the company reporting a "pleasing" first half in which strong Christmas sales pushed profit up by 0.1% to AUD$57.6m. Sales were down 2.9% to AUD1.042bn.
"Underwear and hosiery sales were down 1.4% to AUD311.5m as strong performances at Bonds, Berlei and Hosiery were offset by declines in Clothing NZ and Holeproof.

Outerwear and sport sales were up 2.2% to AUD345.2m; home comfort sales were down 7.4% to AUD233.0m; and footwear sales were down 8.8% to AUD138.7m.

In line with the broader market in Australia, sales to discount department stores grew marginally with declines in department stores and the independent/specialty channel.

Looking ahead, the company declined to forecast second-half performance as "the current economic climate remains challenging and uncertain with consumer confidence remaining at low levels."

The Textile Clothing and Footwear Union of Australia has slammed today's decision,
claiming a number of the brands and divisions continue to be profitable whilst manufacturing in Australia.

It also argues that because Pacific Brands has received nearly AUD18m in government assistance over the past couple of years it has an obligation to keep jobs in Australia.

The Union and leaders from the textile, clothing and footwear industries last week wrote to the Prime Minister seeking his direct involvement in discussions about the urgent need for an industry assistance package for the sector.