Hanesbrands Q2 Boosted by Activewear

July 30, 2015
SGB Update

Led by robust sales in its Activewear segment, Hanesbrands Inc. reported second-quarter revenues increased 13.4 percent to $1.52 billion. Excluding foreign currency fluctuations and the acquisitions of DBApparel and Knights Apparel, sales inched up 1 percent.

Adjusted operating profit excluding non-recurring items increased 15 percent to $265 million while adjusted EPS excluding non-recurring items increased 16 percent to 50 cents a share. Adjusted earnings exclude approximately $126 million and $24 million of pretax charges related to acquisitions and other actions in the second quarters of 2015 and 2014.

Net earnings declined 38.6 percent to $94.9  million, or 23 cents a share, including those items.
 
In the Activewear segment, sales grew 19.0 percent to $378.2 million while operating profit advanced 29.6 percent to $61.5 million. The gains were driven by high-single-digit growth of Champion as well as $37 million in net sales from Knights Apparel, a fan apparel vendor acquired in April. Gear for Sports, another fan apparel business, also contributed to the gains.

“As expected, Champion sales in sporting goods, mid-tier and department store channels grew significantly in the quarter, up 42 percent over last year due to the concentration of new program shipments in the second quarter this year compared to the first quarter last year,” said Gerald Evans, Hanesbrands’ COO, on a conference call with analysts. “In these channels, Champion sales year-to-date are in line with our plan and we remain on track for another year of solid double digit growth.”

Rick Moss, Hanesbrands’ CFO, added that while part of Champion’s growth reflected a seasonal shift of order from Q1 to Q2, a “significant portion” is coming from new distribution.

“It's broad based, it's across both men's and women's programs,” added Moss. “I think it's really proof that we’re bringing innovation to the brand but also the brand itself is resonating in its sort of every day athlete position. It's both women's and men's and sport specialty and mid-tier department store expansion.”

Activewear's operating margins improved 130 basis points in the quarter as product mix, supply chain efficiencies and tight SG&A controls more than offset the expected dilution from Knights Apparel. Hanesbrands also said the integration plan for Knights Apparel has been designed and communicated to employees, with implementation beginning late in the fourth quarter of 2015.

Evans added that Knights Apparel is becoming a “great complement” to its Gear for Sports business. Said Evans, “It makes us a bigger player in the college-license apparel and allows us to compete more effectively in the retail channel.”

In its other segments, Innerwear sales dipped 1.4 percent to $777.6 million as declines in intimate apparel offset gains in basics, including underwear and socks. Operating profits in the segment grew 6.6 percent to $196.0 million. The segment includes Hanes, Playtex, DIM, Bali, Maidenform, Flexees, JMS/Just My Size and Wonderbra.

Direct-to-consumer sales were down 2.7 percent to $101.5 million while operating earnings eased 6.5 percent to $11.2 million. International sales surged 101.2 percent to $131.5 million due to the acquisition of DBApparel in Europe and strong results in Japan while operating earnings gained 31.8 percent to $15.9 million.

Looking ahead, Hanesbrands now expects full-year net sales for 2015 of slightly less than $5.9 billion, compared with a previous guidance range issued with first-quarter results of $5.9 billion to $5.95 billion. Adjusted operating profit is expected to reach $855 million to $875 million, up $2 million on the low end and high end of the range versus previous guidance. Management continues to forecast adjusted EPS of $1.61 to $1.66.

HanesBrands Q2 Boosted by Activewear

July 25, 2014
SGB Update

HanesBrands, the parent of Champion, Hanes and Gear for Sports, reported that acquisition benefits, a strong Activewear performance, and increased operating efficiencies drove record second-quarter financial results. The company again raised its full-year adjusted EPS guidance.

Its innerwear and activewear apparel brands also include Playtex, Bali, Maidenform, Flexees, JMS/Just My Size, Barely There and Wonderbra.

For the quarter ended June 28, net sales increased 11.9 percent to $1.34 billion. Excluding acquisition of Maidenform, sales on a constant currency basis increased nearly 1 percent versus the year-ago quarter.

Net income climbed 27.1 percent to $154.6 million, or $1.51 a share. Operating profit increased 14.2 percent to $207.1 million. Excluding acquisition-related costs, adjusted earnings from continuing operations rose 43.7 percent to $1.71 a share from $1.19 for the year-ago period, easily exceeding Wall Street’s consensus estimate of $1.50.
 
Gross margins lifted 160 basis points to 37.9 percent, driven by benefits from its Innovate-to-Elevate initiative and efficiencies gained in its supply chain.

“The fact that we were able to deliver strong profit growth despite a challenging retail environment also demonstrates that we have the right set of strategies and that we are executing extremely well,” said Rich Noll, chairman and CEO, on a conference call with analysts.

By segment, revenues in Innerwear jumped 14.7 percent to $788.3 million, driven by the Maidenform acquisition. Excluding Maidenform, revenues declined roughly 2 percent from last year, as retailers continued to tightly manage their overall inventory levels. Gerald Evans, COO, said, “We saw this in April and in May, when our shipments fell behind point-of-sale trends. But our shipments recovered in June, as retailers prepared for back-to-school.”

Intimate apparel sales performed better than underwear basics, although innovation platforms, including ComfortBlend and X-Temp underwear and Flexible Fit bras, continued to outperform in their respective categories.

Operating profit in the Innerwear segment grew 19.0 percent to $181.7 million with significant contributions from Maidenform and base business intimate apparel and basics. The segment’s operating profit margin increased 80 basis points to 23 percent.

Activewear segment revenues advanced 8.0 percent to $317.8. The gains were driven by strength in Champion in the sporting goods, mid-tier, and department store channels; as well as solid double-digit growth in both its branded printwear and Gear for Sports businesses.

Evans said Champion’s revenues are up 9 percent in the half, benefiting from new distribution as well as expanded distribution in current accounts. He added, “We remain very bullish on that business, and believe it will certainly deliver that 10 percent growth range for the year that we had spoken about before. And that brand is really firing on all cylinders right now, doing very well.”

Activewear’s operating profits rose 23.1 percent to $45.7 million. Operating margins expanded 180 basis points to 14.4 percent. The margins partly benefited from supply-chain leverage through increased internalized production.

In the Direct to Consumer segment, sales increased 12.7 percent to $104.4 million while operating profit moved ahead 30.7 percent to $11.8 million. International segment sales were up 5.2 percent to $131.6; operating earnings expanded 26.1 percent to $16.1 million.

As a result of strong second-quarter 2014 results, the company raised its adjusted EPS of $5.20 to $5.40, up 40 cents a share from its previous guidance. The company refined its expectations for net sales for the year to approximately $5.075 billion, refined from previous guidance of slightly less than $5.1 billion.

 

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