Oppenheimer lowered its rating on HanesBrands Inc. due in part to signs of slowing growth and competitive pressures at Champion.
Anna Andreeva, lead analyst at Oppenheimer, noted that Champion delivered high-single digit growth in the second quarter, the lower end of its expected growth rate, and the promotional climate in athletic apparel “is only intensifying.”
“As [Under Armour] focuses on less-technical/lower-ticket apparel and [Nike] continues rationalizing inventories, Champion brand could feel some pain,” Andreeva wrote in a note to clients. “In addition, if in fact [Amazon] does develop its own line of athletic apparel that likely impacts more value brands.”
Andreeva also wrote that core margins are eroding with recent improvement largely driven by acquisitions. Other factors impacting the company are HanesBrands’ bras losing market share and weakness in North America overall. She noted that while HanesBrand’s pre-announced third-quarter results last week that were in line with guidance, the fact that international was called out as strong implies that North America is “still pressured.”
On the positive side, Andreeva wrote that HanesBrands still stands to benefit from its “Project Booster” expense-savings initiative and she applauded the company’s increased emphasis on expanding online. But with approximately 90 percent of sales still coming from brick & mortar, sales “could stay pressured, especially during Holiday period (HBI’s categories aren’t necessarily of gift-giving nature, helps explain last two years of big 4Q sales misses).”
The analyst reduced her rating to “Perform” from “Outperform” while lowering her price target to $26 from $32. On Tuesday when the note came out, shares of HanesBrands closed at $23.11, up 25 cents.
HanesBrands markets underwear, intimate apparel and athleticwear. The company’s brands include: Hanes, Champion, Maidenform, DIM, Bali, Playtex, Bonds, JMS/Just My Size, Nur Die/Nur Der, L’eggs, Lovable, Wonderbra, Berlei, Gear for Sports and Alternative Apparel.
Photo courtesy Champion
