Continuing its reorganization, the Australian conglomerate Pacific Brands has decided to discontinue the sale of three licensed brands – Lee, Wrangler and Merrell – as of January 2010. The company has already exited the women’s fashion business and has started restructuring its international footwear operations.
The Merrell business is being taken up by another publicly traded Australian company, RCG Corp., which also operates 136 The Athletes Foot stores in Australia and New Zealand successfully. Merrell is forecast to generate first year revenues of 12 million Australian dollars (€7.0m-$10.0m) in the first year, with a pre-tax profit margin of more than 20 percent. RCG plans to roll out Merrell branded flagship stores throughout the region over the next three or four years.
RCG, which recently paid $6.2 million for a 249-year, royalty-free TAF license, intends to open six to eight Athlete’s Foot doors in the current financial year, ending in June 2010. Also, the company will convert at least 10 existing TAF stores to a larger 150-m² format. It has acquired a small Australian chain of three stores that sell brand comforted and lifestyle shoes, called Shoe Superstore, which will be run as a complementary operation.
The company’s TAF stores achieved an 11 percent increase in comparable store sales in the year ended last June 30. Their revenues increased by 15 percent to A$166.7 million (€97.2m-$138.6m), and their earnings before amortization and depreciation (Ebitda) grew at the same rate to A$8,330,000 (€4.9m-$6.9m).
Pacific Brands saw its own revenues fall in both the sportswear and footwear segments for the fiscal year ended last June 30. In the outerwear and sport segment, where it distributes 18 owned or licensed brands including Dunlop and Stussy, sales declined by 2.3 percent to A$641.4 million (€373.8m-$533.2m). Within this segment, outerwear and sports had higher sales, workwear was flat and the unbranded business was down. Ebitda before significant extraordinary items fell by 3.8 percent to A$56.0 million (€32.6m-$46.6m).
The footwear segment, which currently involves the distribution of 10 owned or licensed brands, posted a 7 percent drop in annual sales to A$251.9 million (€146.8m-$209.4m), but while the branded operations showed strength, the unbranded business proved difficult. The segment suffered a 23 percent drop in Ebitda before significant items to A$28.0 million (€16.3m-$23.3m). The branded businesses in this segment includes Hush Puppies, Clarks, Dunlop Valley and Julius Marlow.
Other brands in the company’s portfolio include well-known Australian names such as Bonds, Sheridan, King Gee and Hard Yakka. They have experienced some growth.
The group’s total net sales dropped by 5.5 percent to A$2 billion (€1.2bn-$1.7bn) in the past year, and it recorded a net loss of A$234.3 million (€136.6m-$194.8m), against a profit of A$116.6 million the year before. The loss was partly due to the weakening of the Australian dollar and came after copious writedowns on brands, factories and other discontinued operations. Net debt fell to A$289.9 million (€169.0m-$241.0m) from A$452.8 million following a major recent refinancing.
For the current fiscal year, Pacific Brands expects Ebitda in the first half to be below last year’s level, but to be balanced out by better results in the second half.
Management is currently restructuring the international footwear operations, and is in the midst of trimming 2,000 jobs, having shut down four factories already with another one set to be shuttered. It has sold or cut 150 brands and plans to do the same with 50 additional ones. It says that its restructuring plan will save it A$50 million (€29.1m-$41.6m) in the 2010 fiscal year alone.
