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Pac Brands shares rise as profits return

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SYDNEY, Feb 18 AAP

February 18 2013, 11:18AM

Shares in Pacific Brands have jumped by more than five per cent after the struggling clothing retailer said it had returned to profitability.

The company made a net profit of $38.9 million in the six months to December 31, up from a $362 million loss in the same period the previous year.

The loss was caused by major restructuring, which the company on Monday said was delivering results despite challenging economic conditions.

Sales in the six months to December were down 6.6 per cent on the previous corresponding period, with growth in its underwear brands Bonds, Berlei and Jockey offset by weak sales in workwear brands Hard Yakka and King Gee.

Pacific Brands said conditions made it difficult to offer financial forecasts for the full financial year.

"Earnings outcomes will be largely dependent upon market conditions, associated sales performance and implementation of the new strategy over time, and may be impacted by ongoing restructuring and rationalisation," the company said in a statement.

Shares in Pacific Brands were 4.25 cents, or 5.8 per cent, higher at 77.25 at 1046 AEDT.

The company said its gross margins improved by 1.9 per cent, reflecting the benefits of more higher-margin products sales, greater direct-to-consumer sales and lower import costs.

It said it also cut the costs of doing business by $7.4 million, to $247.2 million, despite additional investment in selling directly to consumers.

"It's important that we get the balance right between the need for cost containment whilst also investing in the business where it makes sense," he said.

"That's why this latest cost outcome is a good one, because it has occurred at a time when we have increased our investment in the direct-to-consumer channels."

Pacific Brands expects gross margins and costs of doing business in the second half to be in line with the first half.

It said underlying sales performance in the second half continued to be mixed with underwear up, workwear down and the overall group down compared to the previous corresponding period.

A fully-franked dividend of 2.5 cents a share will be paid to shareholders, an increase of 25 per cent on the previous corresponding period.