Pacific Brands Sets Macquarie for Review as Profit to Ebb

Pacific Brands Ltd., Australia’s largest listed clothing manufacturer, appointed Macquarie Group Ltd. to conduct a strategic review after cutting its earnings forecast a fourth time this year. The shares plunged the most in almost four months.

Earnings before interest, taxes and one-time items will range from A$90 million ($84 million) to A$93 million in the year ending June 30, Pacific Brands said today. That would be as much as 26 percent less than the A$122 million posted last year. The stock fell 8.9 percent, the biggest drop since Feb. 18, to 51 Australian cents at the close in Sydney.

Falling earnings raise the stakes for Chief Executive Officer John Pollaers, who led the break-up and sale of Fosters Group Ltd., to stem five straight years of sales declines as retailers increase direct sourcing from overseas. Pacific Brands, the Australian distributor of Bonds underwear and Everlast sportswear, posted net losses of A$691 million over the five years, exceeding its current market value of about A$475 million.

“Challenging markets, declines in consumer sentiment and a warm autumn” mean profit margins are falling even with sales forecast to rise about 3 percent from a year earlier, the Melbourne-based company said today in a statement.

Debt will increase as much as 63 percent from last year to a range of A$250 million to A$260 million, it said.

Reject Shop Ltd., an Australian discount department store chain that also cut its earnings forecast today, slumped 12 percent A$8.05, its lowest in almost 8 years on a closing basis.

Review Update

Pacific Brands said it will provide an update on the review by Macquarie Capital during the full-year result announcement on Aug. 26. It didn’t give further details.

The company will also take one-time costs of A$25 million to A$30 million in the half year ending June 30 to pay for restructuring that will reduce the role of the head office in the business, it said.

Analysts have cut their estimates for Pacific Brands’ Ebit by about 18 percent in the past year.

Pacific Brands said in August that Ebit before items would fall in the first half through Dec. 31 and the company was aiming to stabilize the measure over the full year.

Ebit in the 12 months ending June 30 would be less than a year earlier, Pollaers said at the annual shareholder meeting in October. The company now expects Ebit to drop as much as 26 percent, compared with a Feb. 18 forecast for a decline of about 14 percent.

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