Stormy Weather for Pacific Brands

The Australian company, responsible for the Bonds, Rio and Slazenger underwear labels has posted a $362.4 million loss for the past two quarters, much higher than expected. They attribute this deficit to the fact that Kmart, with whom they had partnered to carry the popular Bonds brand chucked it overboard in favor of in-house brands, as well as “a material decline in the performance of the underwear business, [and] lower growth expectations.”

Already, takeover rumors are circling, with private equity giant Kohlberg Kravis Roberts appearing as a possible buyer. But despite heavy losses, shares of Pacific Brands were trading briskly, indicating that KKR’s offer reflected Pacific Brands’ sustained value.

Sue Mophet, Pacific Brands’ CEO, stated that “there is no certainty that any agreement will be reached with any party.” Despite the disappointing losses, Mophet maintained that underwear “remains our most profitable group in both absolute and relative terms. We are confident underwear will soon resume its growth trajectory.”