Hanesbrands Inc. said sales of Champion grew 7 percent globally in the second quarter, boosted by strength in Europe and online globally. Champion is also expected to grow at a high-single digit rate for the balance of the year.

On a conference call with analysts, Gerald Evans, Hanesbrands CEO, said Champion is particularly benefiting from strength in Europe, a business Hanesbrands acquired last year. Said Evans, “We have high expectations as we bring Champion Europe into the fold. Within this market, we’re seeing particularly strong growth online, driving our Champion business as well as we do see some distribution expansion opportunities in our core brand that we anticipate.”

Champion is also seeing “very strong growth” in Asia and double-digit growth online in many markets as a result of the brand’s omnichannel investments. Added Evans, “So as we look to the balance of the year, it’s that combination of driving the online but also we do expect some broad distribution in the second half of the year on the core Champion business as well.”

Overall sales in the Activewear segment rise 1.4 percent in the second quarter to $379.8 million. Last year’s acquisition of GTM Sportswear, strength in its Hanes activewear business and online sales growth more than offset the impact from the Sports Authority bankruptcy and a shift in licensed sports apparel shipments to the third quarter that was expected in the second.

Richard Moss, Hanesbrands’ CFO, said “As we look to the second half, we expect an acceleration in Activewear’s growth, driven by our Champion and sports apparel businesses.”

“The overall Activewear categories remain strong for us,” added Evans in the Q&A session. “The sports apparel business is always a very strong quarter in the third quarter, and the orders we carried from the second quarter to the third quarter we already see shipping, which gives us confidence that we’ll ship that as well. And then we have a good look at our order book this time of year, and we have a good view of the business going forward on that business. And then finally, we have finally overlapped the Sports Authority bankruptcy of last year. So there’s an awful lot of good things to drive momentum in Activewear as we look towards the balance of the year.”

Operating profits in the Activewear segment declined 9.8 percent to $49.6 million, primarily as a result of the impact of retailer bankruptcies and expenses related to its Project Booster restructuring initiative.

The operating margin decline versus last year in Activewear was driven by short-term acquisition-related dilution as well as lower royalty revenues due to the bankruptcy of Payless ShoeSource, which holds a license for Champion footwear.

Brands in the Activewear segment include Champion, Hanes, JMS/Just My Size, Hanes Beefy-T and Gear for Sports.

Companywide, Hanesbrands’ net earnings climbed 34.6 percent to $172.5 million, or 47 cents a share. On a GAAP basis, second-quarter operating profit of $229 million increased 3 percent. When excluding pretax acquisition-related and integration charges, adjusted operating profit of $255 million and adjusted EPS of 53 cents a share each increased 4 percent.

Sales rose 11.8 percent to $1.65 billion, primarily from acquisition contributions. Organic sales decreased 3 percent, primarily as a result of the expected lower sales in Innerwear and domestic manage-for-cash businesses as well as an unexpected timing shift of sports apparel sales to the third quarter. But organic trends improved sequentially for the second consecutive quarter and positive organic growth is expected in the third and fourth quarters of 2017.

Both earnings and sales results were in line with guidance.

In its other segments, Innerwear sales were down 2.5 percent to $719.0 million while the segment’s operating profits gave back 7.7 percent to $64.3 million. Besides Hanes, some of its major Innerwear brands are Playtex, Bali, Maidenform, JMS/Just My Size and Wonderbra. The sales decline rate improved on the 6 percent slide in the first quarter and 8 percent in the fourth quarter 2016. Sequential improvement for both the basics and intimates businesses were seen. The profit decline reflected the lower sales and Project Booster expenses.

International sales jumped 76.2 percent to $475.2 million while operating earnings added 151.8 percent to $58.3 million. The sales gains were the result of the acquisitions of Champion Europe and Hanes Australasia as well as strong results in Asia.

Second-quarter sales in the online channel globally increased approximately 25 percent companywide and represented approximately 9 percent of total sales.

The second quarter included expenses of $8 million related to its Project Booster program that’s designed to generate investment for sales growth, reduce costs and increase cash flow. For the full year, Project Booster is expected to be cost-neutral with cost savings realized in the second half. By the end of 2019, Project Booster is expected to generate approximately $150 million in annualized cost savings, with annualized reinvestment of approximately $50 million of the savings for targeted growth opportunities.

Hanesbrands maintained its guidance for the year.

For 2017, the company expects net sales of $6.45 billion to $6.55 billion, GAAP operating profit of $845 million to $895 million, adjusted operating profit excluding actions of $935 million to $975 million, GAAP EPS for continuing operations of $1.70 to $1.82, adjusted EPS for continuing operations excluding actions of $1.93 to $2.03, and record net cash from operations of $625 million to $725 million.

Compared with 2016 results, the midpoint of 2017 guidance represents net sales growth of 8 percent, GAAP operating profit growth of 12 percent, adjusted operating profit growth of 5 percent, GAAP EPS growth from continuing operations of 26 percent, adjusted EPS growth from continuing operations of 7 percent, and operating cash flow growth of 11 percent.

For the third quarter, the company expects total net sales of approximately $1.80 billion, an increase of approximately 2.5 percent. More back-to-school shipments are expected to fall in the third quarter than a year ago as retailers time orders closer to sales events. EPS is projected to range between 54 to 57 cents a share, and adjusted EPS is expected to be 59 to 61 cents.  In the year-ago quarter, EPS was 56 cents a share.

Photo courtesy Champion