Hanesbrands Inc. (NYSE:HBI) reported sales in its Activewear segment grew 21.7 percent in the third quarter to $516.8 million, driven by double-digit growth for the Champion brand and the acquisition of Knights Apparel, a college-licensed fan apparel business.
Core sales, which excludes the April 2015 acquisition of Knights Apparel, inched up 2 percent in the segment. Growth of more than 33 percent for Champion in the department store, mid-tier and sporting goods channels offset destocking efforts for its C9 mark (Champion brand sold exclusively to Target). The segment also includes Gear for Sports, another fan apparel resource.
Operating earnings in Activewear expanded 39 percent to $97.2 million.
On a conference call with analysts, Gerald Evans, HanesBrands’ COO, said Champion is benefiting from new distribution; gaining space at existing accounts, including expanding into adjacent categories; and a strong response its designs and innovation. He said Champion is gaining share in both men’s and women’s better activewear.
The acquisition of Knights Apparel added net sales of $84 million to Activewear results in the third quarter. Evans said Knights Apparel sales “are tracking to our full-year plan, while operating profit is coming in slightly ahead of plan.”
He continues to see a “significant long-term growth opportunity” with the combination of Gear for Sports and Knights Apparel. Knights Apparel, with $185 million in annual sales last year, is a leading seller of licensed collegiate logo apparel in the mass channel and has a small position in professional sports licensed apparel in mass. Gear for Sports, with annual sales of approximately $270 million, sells college and professional league fan gear under the Gear for Sports, Champion and Under Armour labels with a particularly strong presence in university bookstores.
“Our goal over time is to expand from the $3 billion licensed collegiate apparel market to the broader $20 billion graphic apparel market,” Evans said.
In Hanesbrands' other segments, sales in Innerwear, including Hanes, Playtex and Maidenform, rose 2.9 percent to $667.2 million. High-single-digit growth in bras and shapewear were offset by a small gain in basics, which were impacted by inventory adjustments at a major retailer. Operating earnings gained 4.7 percent to $136.8 million.
Direct-to-Consumer segment sales slid 5.3 percent to $106.6 million and operating earnings were down 29.3 percent to $11.8 million. International segment revenues climbed 39.7 percent to $300.4 million, reflecting the August 2014 acquisition of DBApparel; operating earnings rose 20.8 percent to $34.8 million.
Companywide, sales expanded 13.6 percent to $1.59 billion. Core sales, which exclude acquisitions and Target’s exit from Canada, increased 3 percent on a currency-neutral basis. Net earnings climbed 36.3 percent to $162.2 million, or 40 cents a share.
Adjusted operating profit – excluding pretax charges related to the DBApparel and Knights Apparel acquisitions and other non-recurring actions – increased 16 percent to $251 million with adjusted EPS also increasing 16 percent to 50 cents a share.
Based on year-to-date results and the outlook for the remaining quarter of the year, Hanes lifted its full-year expectations for adjusted EPS to a range of $1.66 to $1.68, or 44 to 46 cents for the fourth quarter. Previous full-year guidance was $1.61 to $1.66. Its sales guidance for the full year was adjusted to approximately $5.85 billion versus previous guidance had been calling for revenues slightly less than $5.9 billion.
