Australia’s Pacific Brands Limited reported operating earnings dropped 14.4% in its Outdoor & Sport division in the six months ended December 31 as revenues dropped 5.3%. In its Footwear division, operating earnings climbed 7.5% on a 1.5% sales gain.

Overall, Pacific Brand’s EBIT (earnings before interest & taxes) increased 6.2% to AUD$93.5 million ($71.1 million) from AUD$88.1 million ($67 million). Revenues climbed 4.1% to AUD$868.6 million ($660 million) ($71.1 million) from AUD$834.3 million ($634 million).

Outerwear & Sport

In the Outerwear & Sport division, EBIT dropped to AUD$12.5 million ($9.5 million) from AUD$14.6 million ($11.1 million). Revenues slid to AUD$133.1 million ($101.9 million) from AUD$141.6 million ($106.7 million).

Pacific Brands said the outerwear and sport group had a difficult half with its two core areas performing quite differently. In the Sporting Equipment group, bicycles and sporting equipment had a disappointing result with sales falling short of expectations particularly in the discount department store channel. With margin pressure on the value end, the bike business is developing a stronger position at the premium end of the market with the Diamond Back, Haro and Masi brands. This will be strengthened with the addition of the recently acquired Ridley bike license together with a continued roll out of the independent chain of Bike Hub stores. There are currently eight stores with further expansion plans underway.

In the Outerwear area, King Gee performed solidly with its sales supported by the “Jack of All Trades” promotion and the ongoing development of innovative fabrics and products. The acquisition of Yakka will strengthen the workwear category and will introduce a much stronger presence in the corporate and defense apparel sectors. The casual apparel business is being repositioned to encompass all aspects of the value spectrum.

Everlast had a strong six months consolidating its position in the youth sporting and casual market – supported by strong sales in branded footwear. The acquisition of the Streetwear division of Globe International is an important addition to this operating group. It upgrades the casual wear business with its range of strong consumer-relevant
brands including Mossimo, Mooks, Stussy and Paul Frank. It provides a platform for further business and license acquisitions in the lifestyle category and strengthens the company’s position in department and speciality stores. This business was acquired on 2 January 2007 and integration into the Outerwear & Sport group is progressing as planned. Yakka’s lifestyle apparel business will complement Streetwear and will also lead to further growth.

Footwear

In the footwear group, EBIT increased to AUD$22.3 million ($16.9 million) from AUD$20.8 million ($15.8 million). Sales inched up to AUD$154.5 million ($117.4 million) from AUD$152.1 million ($115.6 million).

Footwear had another strong half, continuing to achieve growth through its focus on brand development, product innovation and category management. The business has maintained its market share in a very competitive market. Men’s footwear was strong with product innovation in the Hush Puppies and Julius Marlow ranges driving growth. The lifestyle category has delivered an excellent half with Merrell growing distribution.

Sales continue to grow with Dunlop Volley doing well in the sporting category with strong support from the “Legends in the Backyard” marketing campaign. The group will continue to work closely with international partners, key suppliers and on strengthening consumer relationships through brand advertising. Sourcing efficiencies, increased speed to market and a focus on replenishment programs should lead to improved product development cycles, tighter inventory management and continuing growth in the second half.