Pacific Brands: Buy or sell
Pacific Brands: Buy or sell? Pacific Brands' margins are under pressure from large retailers such as K-Mart and Target promoting cheap home brand products. Management did a commendable job restructuring the company, reducing debt and cutting dead brands, but the company's store roll-out and international expansion plans make us uncomfortable. Both will require a major investment that the board was unwilling to support, and we'd expect the board would recommend selling the company if it can find a buyer. While many discount retailers have been quick to blame the weather and the budget for their problems, the fact is intense competition, obsolete retail concepts and the Internet are having an impact. Pacific Brands owns some iconic brands, such as Bonds, but it's never going to be a great business. Conservative investors should generally steer clear of the discount retail industry. (VIEW LINK)
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