Pacific Brands sells unprofitable footwear, sports apparel business

Pacific Brands [NZX: PBG], the Australian apparel and linen brands business, has split and sold Brands Collective, its unprofitable footwear and sporting apparel brands, recognising a A$30 million loss on the sale. 

The gross proceeds of the sale will be about A$39 million, compared to the carrying value of net assets which is about A$66 million, the Melbourne-based company said in a statement. It expects to recognise the $30 million loss in the June 30, 2015 financial year. The sale comes after Pacific Brands, which also owns the Sheridan and Bonds underwear brands, yesterday confirmed it was in talks to sell the lackluster brands. 

The footwear and apparel operations, which include the Grosby, Julius Marlow and Volley brands, as well as its licensed Clarks, Hush Puppies, Mossimo and Superdry brands, has been acquired by Australian private equity firm Anchorage Capital Partners. IBML, a division of the UK-based Sports Direct International, has bought Dunlop and Slazenger, sports brands it already it owns outside of Australia and New Zealand, and will also take back the Everlast equipment license. 

Meanwhile, Everlast Equipment has been bought by Designworks, a division of The PAS Group, which will also license the Dunlop, Slazenger and Everlast brands from IBML.

The Brands Collective division reported a loss of A$900,000 on an earnings before interest and tax basis as sales fell 7.9 percent to A$204 million in the year ended June 30.

"The sale of the Brand Collective business is consistent with our strategy to simplify and focus Pacific Brands on maximising the potential of our market leading brands such as Bonds and Sheridan," chief executive David Bortolussi said. "While this has been a complicated divestment to execute, the transactions are all unconditional and should be completed within two weeks with minimal disruption to customers and our core business." From a pricing perspective, the divestment represents good value to our shareholders for an unprofitable division." 

The sale comes after Pacific Brands announced the sale of its workwear unit, which owns the Hard Yakka and King Gee clothing brands, to Wesfarmers after impairments against the business resulted in a full-year loss.

Pacific Brands reported an annual loss of A$244 million, from a profit of A$73.8 million a year earlier. The loss was largely due to a non-cash impairments of goodwill and brand names at the workwear business of A$241.7 million. Sales in the year rose 3.8 percent to A$1.32 billion.

Excluding impairments, Pacific Brands' profit fell 28 percent to A$53 million in the latest year. Australia makes up 88 percent of sales and New Zealand is the second-largest contributor at 7.3 percent.

Shares of ASX-listed Pacific Brands rose 4 percent to 51.5 Australian cents, and have declined 23 percent this year. It was unchanged at 51 cents on the NZX, and has declined 27 percent since the start of the year.

(BusinessDesk)