Pacific Brands Limited reports mixed results: Is the stock a buy?

Bonds undies provided some much needed support for Pacific Brands Limited (ASX:PBG) in the first half.

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Pacific Brands Limited (ASX: PBG) delivered a somewhat mixed report for its first-half operations, having managed to increase sales and narrow its net loss. But challenging market conditions are expected to continue which may weigh on the business' performance in the coming months.

Although the company scrapped its dividend, investors still bid the stock 2.6% higher early in the session.

So What: Pacific Brands is the company behind brands such as Bonds, Sheridan and Berlei. For the six-months ended 31 December 2014, it reported a net loss of $108.7 million (compared to a net loss of $219 million in the prior corresponding period), which it blamed on impairment charges to goodwill, brand names and plant equipment. The impairment charges equated to $138.5 million due to a change in the definition of cash generating units as well as currency depreciation.

In the same period, revenue rose 6% to $391.8 million which was driven by a 15% increase in Bonds sales and a 14% jump in Sheridan sales. Meanwhile, Pacific Brands managed to slash its net debt to just $24.2 million, down from $249.1 million. This was a result of various divestments including the sale of its workwear business to Wesfarmers Ltd (ASX: WES) and that of its Brand Collective business.

Unfortunately for investors, "challenging and variable market conditions" are expected to continue through the second half with full-year results largely dependent on trading in May and June. Pacific Brands remains a risky bet, but could pay off for long-term investors – particularly now that it has simplified its business.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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