Pacific Brands Limited saw fiscal year net sales increase 12.1% to A$1.82 billion ($1.43 bn) from A$1.62 billion ($1.22 bn) last year. Net profit increased 4.7% to A$106.0 million ($83.3 mm) from A$101.2 million ($75.7 mm) last year.
Commenting on the result, Chief Executive Officer, Mr Paul Moore said:
“I am pleased to report that we have delivered growing returns for our shareholders in this financial year. We have seen improved performances across each operating group in what has been a challenging and volatile retail market.
“I am pleased to report that we have delivered growing returns for our shareholders in this financial year. We have seen improved performances across each operating group in what has been a challenging and volatile retail market.
“Importantly, the momentum we saw in the first half continued in the second and we are very well placed to sustain future growth.
“Strategic acquisitions to support category expansion are a core component of the Pacific Brands growth model and in this financial year, we have completed two the Yakka Group and Brand Collective. These businesses significantly increase our size and market presence providing further scope to leverage our scale.
“The Yakka Group is an Australian icon holding the number one workwear and corporate clothing brands in Australia and New Zealand. When added to King Gee, it further cements our position in the workwear market. In the three months since acquisition, the business has performed well and in line with expectation. Integration has begun and a comprehensive strategic review is under way.
Implementation of the recommendations coming from this review will be a key focus for Pacific Brands over the next 18 months or so.
“Brand Collective was acquired in January 2007. Its brands have strengthened our position in lifestyle apparel and we anticipate further growth in this category.
“The well-known brands, including Mossimo, Stussy, Mooks, Freshjive and Paul Frank provide a strong position in the lifestyle and casual apparel market. Together with our existing Merrell and Everlast businesses, and Lee and Wrangler that were acquired with Yakka, Pacific Brands now has a meaningful presence in this sector.
“Consumers are increasingly demanding better products, more choices and faster product introductions. Innovation and product development therefore remain key drivers of our sales growth.
“Operational efficiency remains a strategic driver. We will continue to leverage our increasing scale and to work collaboratively with our suppliers and customers to meet their evolving business requirements.
“We are pleased with the strong cash generation during the year providing the opportunity for us to pay down debt and continue with our investment in brands. FY08 has started well and we are working to deliver another year of growing returns for our shareholders.”
Outerwear & Sport
The Outerwear & Sport division saw sales jump 45.8% for fiscal 2007 to A$363.2 million ($285.4 mm) from A$249.1 million ($186.3 mm) in the prior fiscal year. EBITA for the division increased 21.1% to A$27.0 million ($21.2 mm) from A$22.3 million ($16.7 mm) last year.
During the fiscal year, Pacific Brands acquired Brand Collective and the Yakka Group.
Continuing the work started in the first half; the core business has been in a transition phase and has now implemented some structural changes. Additional costs incurred during the year, while the business was repositioned, had the effect of reducing the total group EBIT percentage.
The bikes and equipment businesses have been repositioned and the division now has a strong offering across each market segment. The introduction of the Ridley licence, Nalini and Diora brands have strengthened the offer in the premium sector.
The casual outerwear business was impacted by difficult trading conditions at the value end. This business has been simplified with unprofitable, unbranded sales discontinued and a renewed focus on the core brands of Lightning Bolt and Slazenger.
Everlast continues its strong trend in the youth sporting apparel segment with footwear performing well alongside the apparel business.
King Gee generated strong sales growth with a focus on customer service and new product introductions. They have continued to roll out the “totally workwear” store concept increasing the brands distribution.
The groups result includes three months of trading from the Yakka Group. Brand Collective has performed in line with expectation and improved its distribution in specialty stores.
Outerwear & Sport has spent the year repositioning the core business and is expected to return to profitable growth in FY08. The addition of the Yakka Group and Brand Collective has significantly improved the brand strength, product and marketing development capabilities for the group.
Footwear
The companys footwear division saw fiscal year net sales increase 0.9% to A$280.1 million ($220.1 mm) from A$277.5 million ($207.5 mm) for fiscal 2006. EBITA outpaced sales, growing 4.5% to A$37.3 million ($29.3 mm) from A$35.7 million ($26.7 mm) last year.
Strong sales performances were said to have been achieved in Hush Puppies, Dunlop, Merrell and Julius Marlow.
The growth in pick and pack replenishment programs across all customer groups has resulted in the rise to now over six million pairs of shoes being individually packed per annum in the Altona distribution centre in Melbourne. The group has consolidated the New Zealand warehouse into Altona to further improve efficiencies.
The group is working closely with retailers and logistics partners on increasing direct deliveries from source to customer.
Merrell footwear continues to gain share in the outdoor/lifestyle category through a targeted distribution program with key specialty retailers. The concept store program continues to work well for Hush Puppies in New Zealand and this will continue with planned concept store openings for Hush Puppies and Naturalizer in Australia.
A focus on inventory management, consolidation of suppliers and improved lead times have all contributed to positive earnings results in a challenging market place.
The group will continue to invest in consumer research and innovation will remain the focus across fit, style, materials and comfort for all brands.
Outlook
In FY08 the company expects sales, EBITA and NPAT all to increase strongly. Sales and EBITA are expected to rise by between 15% and 20%. Given the higher interest bill, following debt-funded acquisitions, the company expects NPAT to rise by around 10%+.
