The struggling company behind such household names as Bonds, Jockey and Berlei, Pacific Brands (ASX: PBG) released results for the first half of its 2013 financial year this morning, including sales down 6.6.% to $639 million but net profit totaling $38.9 million — a handsome improvement over the loss of $362.4 million in the corresponding period in 2012.
A return to growth in the core underwear business
For the half year, underwear led the way, with key brands’ sales up 8.8%, leading the company’s overall margins higher by 1.9 percentage points. Further highlights include Bonds’ website now shipping internationally to Singapore, the UK and US, and the opening of the first Bonds retail stores. However, the workwear segment suffered from a cyclical downturn and slow employment growth, with sales dropping 9.1%, while homewear and footwear sales fell 11%.
“There is still plenty of work to be done to stabilise sales performance and return the business to sustainable growth,” said Chief Executive John Pollaers. “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.”
Pacific Brands’ burgeoning turnaround comes amid positive half year results from David Jones’ fashion segment (ASX: DJS), Specialty Fashion Group (ASX: SFH) and specialty retailer Country Road (ASX: CTY). But the overall retail sector remains volatile, with future market conditions uncertain and consumer confidence continually shifting.
Debt down and dividends up
Encouragingly, Pacific Brands has brought down its sizable debt load by 26.6%, going from $242.2 million in the first half of the 2012 financial year to $177.7 million today. What’s more, the company has increased its dividend by 25%. PacBrands will pay 2.5 cents a share, fully franked, representing a payout ratio (that is, the percentage of net income paid out to shareholders) of 59%.
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