All Black underwear sponsorship deal with Jockey boosts first-half sales 5%

Tuesday 16th February 2016

Letting consumers watch toned rugby players parade around in their underwear appears to have paid off for Australia's Pacific Brands, which says its second year of Jockey sponsoring the All Blacks has proved a “great fit”.

Jockey became the official off-field underwear sponsor of the All Blacks and All Blacks Sevens in a three-year sponsorship deal in early 2014, though the value of the deal was not disclosed. It was a follow-on from Dan Carter’s 10-year endorsement relationship with the international brand, and he then shifted to a new role of global ambassador.

Pacific Brands said it had had a strong performance from Jockey, and New Zealand in particular, with sales up 5 percent to A$14.1 million in the six months ended Dec. 31 compared to A$13.4 million in the same period a year earlier. The uplift in New Zealand was driven by its association with the Rugby World Cup winners and additional distribution, the company said. It opened six new stores in New Zealand although has no plans to open any more in the second half of the year.

Jockey’s Sports performance range of underwear had been particularly strong, it said, and while the All Blacks sponsorship was clearly focused on men’s underwear, there had been a halo effect on sales across all Jockey’s categories including women and kids.

Its Berlei brand also had a good start to the 2016 financial year, with the launch of a new everyday bra in New Zealand during the half, its first in a number of years.

Pacific Brands reported overall net profit A$24.3 million for first half, a turnaround from a loss of A$108.7 million a year earlier. The company withheld paying a dividend last year despite becoming debt free for the first time, saying it wanted to get its balance sheet right for future investment. With net cash now at A$33 million, the company is paying a 1.6 Australian cents per share fully-franked dividend.

Sales were up 8.6 percent across all brands to A$425.3 million, with the Sheridan and Bonds brands now accounting for 71 percent of total sales.

Bonds, the major revenue earner, had a 14 percent rise in sales compared to overall growth of 6.3 percent across its total underwear division, with retail sales surging 39 percent on the back of 10 new Bonds stores and 66 new activewear concessions in Myers stores in Australia.

Last year marked a turning point for the dual-listed company after six years of restructuring, which included selling off a number of loss-making brands, shifting production to Asia, and putting more focus on retailing through its own stores rather than just wholesaling through supermarkets and department stores.

Chief executive David Bortolussi said its strategy of slimming down the company to focus on a higher quality, simplified business with greater growth potential and a strong balance sheet was working.

“At our full-year results and AGM, I said that the 2015 financial year marked a turning point in sales and earnings trajectory of Pacific Brands and I am pleased that our 2016 first half results have demonstrated it,” he said.

“Our strategic priorities are clear, we are investing in growth and expect our operational plans to deliver earnings before interest and tax of A$73 million to A$75 million" in the current financial year.

Currency depreciation remains a risk, with the weaker Australian dollar and 80 percent of the cost of goods sold settled in US dollars. The group increased prices at Bonds retail outlets in October and at the underwear wholesale level last month and has been introducing cost-saving measures to offset immediate currency headwinds. Further measures are being taken to address currency depreciation risk in the 2017 financial year.

Pacific Brands share price remained unchanged on the NZX at 90 cents, and were up 9 percent to 85 Australian cents on the ASX.

BusinessDesk.co.nz

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