Underwear and apparel manufacturer Pacific Brands Limited (ASX: PBG) has released a weak set of half-yearly results which have not been well received by the market. By midday the stock was down around 11%. Pacific Brands shares are now down 15% in the past 12 months compared with a 6% gain in the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).
Highlights from the interim results
- The Bonds and Sheridan brands boosted sales by 20% and 15% respectively
- Online sales as a percentage of group sales increased from 1% to 3%
- Group sales increased 2.7% to $656.3 million
Lowlights from the interim results
- Underlying EBIT margin fell 1.6% to 8.4%
- Underlying net profit after tax dropped 15.1% to $33 million
- Underlying earnings per share declined from 4.3 cents per share (cps) to 3.6 cps
- Dividends declined half-a-cent to 2 cps
Foolish takeaway
During the question and answer section of the results presentation investors and analysts were left with little confidence that the decline in earnings is over with management providing guidance that the weak first half will flow through to the second half. Full year EBIT is expected to be down around 14%.
From an investor's point of view the question is whether this weakness is now fully reflected in the share price and whether management can deliver on its promises in coming periods. If the answer is "yes" to both of these questions then it could be time to buy.
