Shareholders in Australian apparel group Pacific Brands have rejected management's remuneration package.

At the company's AGM in Melbourne today (25 October) some 315m votes, or 52.8% voted against the package, while 279m, or 46.9% were in favour.

The remuneration report said that chief executive Sue Morphet and the company's other senior managers received short-term cash incentives, even though earnings targets were not met.

Chairman James MacKenzie said the board decided to "open the gate on payments" on its short-term incentive scheme after the company "narrowly missed" the 90% EBITDA target set for the year.

MacKenzie justified the decision, referring to the "extremely difficult retail environment", which it primarily attributed to Kmart delisting its products, as well as the impact of input cost increases.

"What we should have also emphasised was that the delivery of the transformation program - one year ahead of schedule and despite many thinking it couldn't be done - was a critical consideration in the board's decision to open the gate for the payment of short-term incentives. The scale and scope of the transformation should not be underestimated," said MacKenzie.

The company said it expects its 2012 underlying sales and earnings to be below that of 2011, with earnings in the first half to be "materially lower" in the first half.

Morphet attributed the weakened results to a "number of negative factors" including "continuing weak retail conditions, changes to its discount store department base, [including delisting by Kmart], and substantial input cost increases".

"It will take some time to make up the lost sales as we build distribution elsewhere. Accordingly, we expect sales in the underwear group to be down this year," she said.