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Pacific Brands sells workwear division to Wesfarmers as profits plummet on costs

Struggling Australian apparel maker and retailer Pacific Brands, which Tuesday announced losses of A$224.5m, is to sell its workwear division to retail giant Wesfarmers for A$180m ($167m) in cash. The money will be used to pay down debt, Pacific Brands said. The company, which also owns hosiery and intimates brand Bonds and Sheridan sheets, produces workwear brands Hard Yakka, KingGee and Stubbies. Pacific Brands also said Tuesday it has promoted its CFO David Bortolussi to oversee the ongoing recovery effort, replacing former chief executive John Pollaers who left the company in July following a disagreement with the board over strategy.

Despite the changes, Pacific Brands’ shares plummeted almost 9% to 92 cents in afternoon trading as the company said soaring costs plus sinking profits and margins are set to continue.

Net loss hit A$224.5m for the year to June 30, compared to a A$73.8m profit in fiscal 2012/13. The full year result was weighed down by a A$241.8m goodwill writedown to the workwear division and A$46.6m in restructuring costs.

Stripping out one-time items as well as interest and tax, earnings fell 25% to A$91.2m, in line with its reduced guidance issued in June.

Sales, however, rose 3.8% to A$1.32bn.

But Bortolussi said that although the company expects to continue to lift sales during H1, weaker profit margins and a lower Australian dollar would push earnings down again.

“The company expects a continuation of challenging and variable market conditions,” he said on Tuesday.

He also said the company continued to look at other options to simplify its businesses, as well as measured investment in retail, category expansion and international distribution.

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