Pacific Brands is poised to sell off famous brands like Hard Yakka and King Gee after forecasting another difficult year in 2015.
The clothing and textiles distributor has flagged another "material" fall in earnings in 2015 and said the outcome of a strategic review currently underway could have a material impact on its outlook.
The owner of Bonds, Sheridan, Berlei and Hard Yakka withheld its final dividend after rising costs and weak wholesale sales continued to squeeze margins, leading to a 28.2 per cent fall in underlying net profit to $53.0 million in 2014.
The company also announced plans to sell its struggling workwear business to Wesfarmers' Industrial and Safety division for $180 million as part of a strategic review and appointed chief financial officer David Bortolussi as chief executive to replace John Pollaers.
Mr Pollaers stepped down in July after a falling out with the board over the company's future direction. It is understood he was opposed to the sale of the workwear business, which owns iconic brands King Gee, Hard Yakka and Stubbies.
While sales rose 3.8 per cent to $1.322 billion, earnings before interest tax and significant items fell 25.3 per cent to $91.2 million, in line with Pacific Brands' $90 million to $93 million guidance, which was cut by more than $10 million in June.
Earnings from the underwear division fell 18.6 per cent to $63.6 million, despite a 7.7 per cent rise in sales, as margins were crimped by higher discounting and clearance activity, the weaker Australian dollar and rising costs.
Earnings from Sheridan Tontine fell 21.5 per cent to $13.9 million despite a 12.1 per cent rise in sales following significant investment in brands, new category development and higher promotional activity.
In workwear, earnings before interest and tax fell 41.1 per cent to $22.1 million despite a 1.6 per cent rise in sales and the division incurred a bottom line loss of $247.2 million after goodwill impairment charges of $270 million in the first half of 2014.
The brand collective division, which includes footwear brands Grosby and Hush Puppies, reported a $0.9 million loss before impairment charges and a $22.3 million loss after writedowns as sales fell 7.9 cent to $204.5 million.
The underlying net profit result was slightly ahead of consensus forecasts around $52 million.
PacBrands also booked one-off costs of $312 million, or $277.5 million after tax, including non-cash goodwill impairment charges of $242.3 million, other asset writedowns of $16.2 million, and restructuring costs of $32.9 million. These one off costs took total impairment charges and restructuring costs over the last six years to more than $1.2 billion and led to a bottom line loss of $224.5 million in 2014.
The outlook for 2015 looked bleak.
PacBrands said sales had risen in the first eight weeks of 2015 and were expected to be higher over the year, underpinned by new retail and online stores. But gross margins were expected to come under more pressure due to increased competition and foreign exchange movements, while costs of doing business were expected to rise.
"EBIT is expected to be down materially (but up on second half 2014 EBIT of $36 million)," the company said.
Mr Bortolussi, who has been leading a review of Pacific Brands, costs and strategy, joined the company in June 2009 as chief financial and operating officer after a long career in the consumer and retail sectors. Prior to joining Pacific Brands, he held senior management and consulting roles at Foster's Group, McKinsey & Co and PricewaterhouseCoopers.
"We are very pleased David has agreed to step up to the leadership role. David's background and deep knowledge and experience in the company see him uniquely qualified to take on the role," said chairman Peter Bush.
Pacific Brands' group financial controller David Muscat has been appointed acting chief financial officer pending appointment of a permanent CFO.
The acquisition of workwear will enable Wesfarmers' industrial and safety unit to expand into new customer segments in industrial and corporate wear in Australia and New Zealand and move into new markets overseas including the UK.