AUSTRALIA: Pacific Brands swings to $219m H1 loss
- Swings to H1 net loss after tax of $219.0m
- Sales were up by 2.7% to $656.3m
- Warns of "significant headwinds"
Australian clothing and footwear group Pacific Brands has booked its first rise in reported sales in five years, but swung to a net loss on write-downs linked to its struggling workwear division.
The company, whose brands include Berlei, Bonds, Explorer and Jockey, also warned of more restructuring costs in the second half.
During the six months to 31 December, Pacific Brands was hit by $252m in impairment charges and restructuring costs related to its workwear division and its Brand Collective unit, which includes Hush Puppies and Clarks footwear.
This pushed it to a net loss after tax of $219.0m, from a $38.9m profit in the same period last year. Earnings before interest and tax (EBIT) were down 14.1% to $55.2m, and net profit after tax fell 15.1% to $33.0m.
However, sales were up by 2.7% to $656.3m - driven by a 20.4% hike at its Bonds underwear brand, a 15% rise at its Sheridan bedding business, continued expansion in retail and online, and a successful Christmas trading period.
But gross margins were essentially flat as gains in its underwear and Sheridan businesses were offset by increased promotional activity, lower margin workwear sales, and higher import costs and currency issues.
The company said its workwear business has been hit by a slowdown in the Australian manufacturing, construction and defence sectors where a rise in unemployment has stifled demand for protective and corporate clothing.
While CEO John Pollaers pointed out there are "clear signs of improvement in underlying performance and momentum is building across a number of brands and businesses," he also warned that "the full benefits of our investments will take time to materialise in the face of significant headwinds."
Looking ahead, full year earnings are expected to be down around 14%, the company said, with further restructuring costs expected but likely to be "significantly less" than those in the first half.
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