A plan to sell the workwear division may have spurred the exit of Pacific Brands CEO John Pollaers

Workwear was a poor performer. Photo: Glenn HuntPacific Brands chief executive John Pollaers may have quit over a proposal to sell the company’s workwear division, which owns such brands as Hard Yakka, KingGee and Stubbies.
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Workwear was one of the worst performers in the Pacific Brands stable in the first half of 2014 and the company was forced to write down the value of goodwill by $248 million after a near 40 per cent fall in workwear earnings.

But despite declining sales and profits in recent years, Pacific Brands remains the global leader in the workwear industry and Mr Pollaers was confident about its longer term prospects.

Analysts believe a strategic review by Macquarie Capital may have recommended the sale of several brands and businesses, including workwear, flooring and the Brand Collective division, which includes footwear and sportswear brands such as Clarks, Hush Puppies, Volley, Dunlop and Everlast.

They believe Mr Pollaers may have baulked at the sale of workwear, given Pacific Brands’ historic links to the category, the strength of its brands and the potential for a rebound in earnings when mining activity picks up.

”Flooring has been non-core for a long period of time, he’d be happy to get rid of that … Brand Collective changed at the half-year and there’s no goodwill or brand value in that division,” said one analyst, who declined to be named.

”But John was keen to make workwear work – it’s been under the hammer for the last few years but he wanted to be the dominant player in workwear and that well could be the reason for the disagreement,” the analyst said.

Workwear accounts for about 28 per cent of group sales but is expected to generate only 17 per cent of group earnings in 2014.

”That business would be more structurally challenged than the other divisions and that would be a more likely area of dispute than Brand Collective,” the analyst said.

Mr Pollaers quit unexpectedly on Monday after a dispute with the board over the socks and jocks maker’s future direction.

Chairman Peter Bush said the ”divergence in views” had become clearer after the board hired Macquarie Capital in April to conduct a strategic review.

The company declined to comment on the strategic review, saying it was incomplete and shareholders would have to wait until August for details.

Mr Pollaers’ departure after less than two years has rattled major shareholders, who had backed his long-term vision for the company.

But the shares, which slipped 0.5¢ to 54.5¢ on Tuesday, are underpinned by takeover speculation. Private equity investors including KKR have been running the numbers on the company.

JP Morgan analyst Shaun Cousins said finding a replacement for Mr Pollaers would be more difficult because of the strategic review and the strong views of the board regarding the path forward. This suggests that the board may delay making a decision or will make an internal appointment.

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