Pacific Brands Limited

In the last 12 months, shares of Pacific Brands (ASX: PBG) have risen 31%, versus a 16% rise in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO). What’s behind this impressive outperformance?

An international agreement was put forward whereby the companies that signed it would be responsible for establishing and paying for an improved fire and building safety program in Bangladesh over a five-year period. However, companies such as Woolworths (ASX: WOW), Wesfarmers (ASX: WES) and Pacific Brands (ASX: PBG) have all refused to sign.

The former chairman of Pacific Brands, James MacKenzie, has retired from the board of the clothing, footwear and homewares supplier.

Going on past history, demergers can certainly add value for shareholders. It may be hard to believe that Origin Energy (ASX: ORG) was once part of Boral Limited (ASX: BLD). Origin’s market cap is now more than $13.6 billion, compared to Boral’s $3.7 billion. Both ‘protection solutions’ maker Ansell Limited (ASX: ANN) and clothing business Pacific Brands (ASX: PBG) were once part of the same company, Pacific Dunlop, and it could be argued both are doing much better going it alone.

Just how big the shift in the Australian fashion industry is has been outlined in a report by analysis company IBISWorld. The report notes that spending on fashion is set to drop by 1.7% in 2013 to $12.2 billion, before turning around with anticipated growth of just 1.1% over the next five years. Most of that growth will be dominated by high end fashion lines, sold by the likes of Oroton Group (ASX: ORL), and budget brands like those offered by Pacific Brands (ASX: PBG).

Last week’s stimulus package introduced by the Bank of Japan was aimed at kick starting the Japanese economy and lowering the Yen. It also means Japanese-made automobiles will be significantly cheaper to import, increasing competition for the Cruze even further. It’s not just the car industry feeling the exchange rate heat of course. For example, steel manufacturers BlueScope (ASX: BSL) and Arrium (ASX: ARI) have had to undergo massive restructuring projects just to survive, while Pacific Brands (ASX: PBG) and ARB Corp (ASX: ARP) have both moved manufacturing off-shore to remain competitive in a high Aussie dollar world.

Broker Rating Order Company Old Rating New Rating Broker Upgrade 1 ADELAIDE BRIGHTON LIMITED Neutral Buy Citi 2 AMCOR LIMITED Sell Buy Credit Suisse 3 BOART LONGYEAR LIMITED Sell Neutral Macquarie 4 COCA-COLA AMATIL LIMITED Neutral Buy JP Morgan 5 DRILLSEARCH ENERGY LIMITED Neutral Buy Macquarie 6 ECHO ENTERTAINMENT GROUP LIMITED Neutral Buy Macquarie 7 EVOLUTION MINING LIMITED Neutral Buy Credit Suisse 8 IINET LIMITED Sell Neutral Credit Suisse 9 PANAUST LIMITED Sell Neutral Credit Suisse 10 SOUTHERN CROSS MEDIA GROUP Sell Neutral JP Morgan 11 SPECIALTY FASHION GROUP LIMITED Sell Neutral Credit Suisse 12 SUPER RETAIL GROUP LIMITED Neutral Buy CIMB Securities 13 TASSAL GROUP LIMITED Neutral Buy JP Morgan Downgrade 14 ALUMINA LIMITED Buy Neutral Macquarie 15 AMCOR LIMITED Buy Neutral Citi 16 AMCOR LIMITED Neutral Sell JP Morgan 17 ARB CORPORATION LIMITED Neutral Sell Citi 18 ARDENT LEISURE GROUP Buy Neutral UBS 19 ARISTOCRAT LEISURE LIMITED Neutral Sell Credit Suisse 20 ASCIANO GROUP Neutral Sell Macquarie 21 AUSENCO LTD Buy Neutral JP Morgan 22 BOART LONGYEAR LIMITED Neutral Sell UBS 23 BREVILLE GROUP LIMITED Buy Neutral Credit Suisse 24 CABCHARGE AUSTRALIA LIMITED Buy Neutral CIMB Securities 25 CFS RETAIL PROPERTY TRUST Buy Neutral BA-Merrill Lynch 26 CFS RETAIL PROPERTY TRUST Neutral Sell Credit Suisse 27 CHARTER HALL RETAIL REIT Neutral Sell Citi 28 COMMONWEALTH PROPERTY OFFICE FUND Buy Neutral BA-Merrill Lynch 29 FANTASTIC HOLDINGS LIMITED Buy Neutral Macquarie 30 FANTASTIC HOLDINGS LIMITED Buy Neutral JP Morgan 31 FORTESCUE METALS GROUP LTD Buy Neutral Credit Suisse 32 GOODMAN GROUP Buy Neutral Macquarie 33 GPT Neutral Sell Credit Suisse 34 GWA GROUP LIMITED Neutral Sell Citi 35 ILUKA RESOURCES LIMITED Neutral Sell CIMB Securities 36 ILUKA RESOURCES LIMITED Buy Neutral Credit Suisse 37 INVOCARE LIMITED Neutral Sell Citi 38 MACQUARIE ATLAS ROADS GROUP Buy Neutral Deutsche Bank 39 MCMILLAN SHAKESPEARE LIMITED Buy Neutral Credit Suisse 40 MERMAID MARINE AUSTRALIA LIMITED Buy Neutral Macquarie 41 MONADELPHOUS GROUP LIMITED Buy Neutral CIMB Securities 42 MONADELPHOUS GROUP LIMITED Buy Neutral Macquarie 43 MONADELPHOUS GROUP LIMITED Neutral Sell BA-Merrill Lynch 44 MONADELPHOUS GROUP LIMITED Neutral Sell UBS 45 MONADELPHOUS GROUP LIMITED Neutral Sell Deutsche Bank 46 PACIFIC BRANDS LIMITED Buy Neutral Macquarie 47 SEEK LIMITED Buy Neutral UBS 48 SONIC HEALTHCARE LIMITED Buy Neutral BA-Merrill Lynch 49 SONIC HEALTHCARE LIMITED Buy Neutral JP Morgan 50 SOUTHERN CROSS MEDIA GROUP Buy Neutral UBS 51 THE REJECT SHOP LIMITED Buy Neutral Macquarie 52 WOODSIDE PETROLEUM LIMITED Neutral Sell Macquarie 53 WOODSIDE PETROLEUM LIMITED Buy Neutral Citi   Recommendation Positive Change Covered by > 2 Brokers Order Symbol Previous Rating New Rating Change Recs 1 SFH - 25.0% 25.0% 50.0% 4 2 KMD 33.0% 67.0% 34.0% 3 3 DLS 67.0% 100.0% 33.0% 3 4 EVN 67.0% 83.0% 16.0% 6 5 DXS 14.0% 29.0% 15.0% 7 6 IIN 57.0% 71.0% 14.0% 7 7 BEN - 25.0% - 13.0% 12.0% 8 Negative Change Covered by > 2 Brokers Order Symbol Previous Rating New Rating Change Recs 1 FAN 33.0% - 33.0% - 66.0% 3 2 SAI 63.0% 13.0% - 50.0% 8 3 AWC 50.0% 13.0% - 37.0% 8 4 MMS 100.0% 67.0% - 33.0% 3 5 APA 17.0% - 14.0% - 31.0% 7 6 ARI 50.0% 20.0% - 30.0% 5 7 ILU 38.0% 13.0% - 25.0% 8 8 BRG 100.0% 75.0% - 25.0% 4 9 DOW 100.0% 75.0% - 25.0% 8 10 SHL 38.0% 13.0% - 25.0% 8   Target Price Positive Change Covered by > 2 Brokers Order Symbol Previous Target New Target Change Recs 1 SFH 0.813 1.083 33.21% 4 2 ARI 1.057 1.346 27.34% 5 3 DOW 4.688 5.884 25.51% 8 4 SWM 1.939 2.393 23.41% 8 5 BLY 1.620 1.920 18.52% 8 6 KMD 1.575 1.835 16.51% 3 7 BEN 8.298 9.484 14.29% 8 8 PBG 0.651 0.726 11.52% 7 9 AWC 1.144 1.270 11.01% 8 10 IVC 9.067 10.022 10.53% 6 Negative Change Covered by > 2 Brokers Order Symbol Previous Target New Target Change Recs 1 AQP 1.680 1.023 - 39.11% 5 2 SAI 4.494 3.960 - 11.88% 8 3 BRG 6.508 6.163 - 5.30% 4 4 MGX 0.975 0.944 - 3.18% 8 5 AAD 1.592 1.560 - 2.01% 5 6 EVN 1.873 1.837 - 1.92% 6 7 SHL 13.818 13.573 - 1.77% 8 8 ILU 10.000 9.900 - 1.00% 8   Earning Forecast Positive Change Covered by > 2 Brokers Order Symbol Previous EF New EF Change Recs 1 CFX 13.464 2005.786 14797.40% 7 2 BSL 0.067 3.667 5373.13% 4 3 APA 20.575 26.225 27.46% 7 4 ARI 12.805 15.338 19.78% 5 5 SFH 6.480 7.644 17.96% 4 6 QAN 10.688 12.438 16.37% 7 7 CLO 9.000 10.310 14.56% 3 8 AIO 34.450 37.308 8.30% 8 9 FGE 76.733 80.667 5.13% 3 10 DOW 47.315 49.731 5.11% 8 Negative Change Covered by > 2 Brokers Order Symbol Previous EF New EF Change Recs 1 YAL 3.920 - 5.180 - 232.14% 5 2 QRX 7.933 0.600 - 92.44% 3 3 MGX 18.730 12.909 - 31.08% 8 4 ILU 52.775 36.536 - 30.77% 8 5 FWD 58.460 45.720 - 21.79% 5 6 DML 13.202 11.045 - 16.34% 4 7 SAI 25.688 22.086 - 14.02% 8 8 SWM 20.625 17.866 - 13.38% 8 9 IMD 18.233 16.333 - 10.42% 3 10 EHL 8.633 7.850 - 9.07% 6   Technical limitations

While the outlook is tentatively improving for the apparel retailers such as Pacific Brands (ASX: PBG), retailers selling products other than fashion apparel look to be somewhat more confident. With a number of niche leading retailers having reported already this season ,this is certainly a space worthy of investigation.

The struggling company behind such household names as Bonds, Jockey and Berlei, Pacific Brands (ASX: PBG) released results for the first half of its 2013 financial year this morning, including sales down 6.6.% to $639 million but net profit totaling $38.9 million — a handsome improvement over the loss of $362.4 million in the corresponding period in 2012.

Retailer Pacific Brands is pinning its future on the success of Bonds underwear and Sheridan sheets as it focuses on key brands and online sales to improve earnings.