HanesBrands raised its 2016 sales guidance while slightly lowering its EPS guidance to reflect the expected contributions from the pending acquisitions of Champion Europe and Pacific Brands Limited as well as debt refinancing.
The acquisition of Champion Europe is expected to close in late June, and Pacific Brands Limited in July.
The company updated its financial guidance in conjunction with investor meetings and scheduled participation Wednesday, June 1, 2016, at the Citi 2016 Retail Seminar in New York City. Hanes Chief Operating Officer Gerald W. Evans Jr. and Chief Financial Officer Richard D. Moss are scheduled to attend the conference.
Hanes now expects 2016 net sales of approximately $6.15 billion to $6.25 billion, up from the previous guidance range of $5.8 billion to $5.9 billion.
On a GAAP basis, diluted EPS is expected in the range of $1.51 to $1.57, compared with previous guidance of $1.63 to $1.73 as a result of acquisition-related charges, and GAAP operating profit is expected to be in the range of $780 million to $815 million, compared with previous guidance of $835 million to $865 million as a result of acquisition-related charges.
On a non-GAAP basis adjusted to exclude acquisition-related actions, EPS is expected to be in the range of $1.89 to $1.95, up from previous guidance of $1.85 to $1.91, and operating profit is expected to be in the range of $940 million to $975 million, up from previous guidance of $920 million to $950 million.
“Our Sell More, Spend Less and Make Acquisitions strategy continues to create value,” Evans said. “The acquisitions of Champion Europe and Pacific Brands will make meaningful contributions to our ongoing success and growth, and we are looking forward to adding these operations and their strong management teams to our worldwide portfolio.”
On an annualized basis, Hanes expects the acquisitions of Champion Europe and Pacific Brands to contribute approximately $800 million in net sales and approximately $70 million in operating profit before synergies. The annualized interest expense to fund the acquisitions is expected to be $40 million. Due to the timing of the expected acquisition closings and the seasonality of the businesses, in 2016 Hanes expects to benefit from approximately one-third of annualized profitability while incurring approximately three-fourths of annualized interest expense.
In addition to expected post-closing acquisition contributions for the balance of the year, the guidance reflects debt refinancing and the tax-rate effect of the new FASB Accounting Standards Update related to accounting for stock compensation and excludes non-core Pacific Brands businesses that are expected to be divested and reported on a discontinued-operations basis. Guidance for adjusted operating profit and adjusted EPS accounts for an estimated $160 million of pretax charges related to debt refinancing and the acquisitions and integrations of Hanes Europe Innerwear, Knights Apparel, Champion Japan, Champion Europe and Pacific Brands.
Hanes continues to expect record net cash from operations of $750 million to $850 million, unchanged from prior guidance. The company expects capital expenditures of approximately $75 million, up from previous guidance of approximately $70 million.
Hanes expects interest expense and other expenses to be approximately $150 million combined, an increase from previous guidance of $115 million to $120 million, reflecting the financing of the Champion Europe and Pacific Brands acquisition, including approximately $6 million of prefunding expense in the second quarter. The 2016 full-year tax rate percentage is expected to be in the high single-digits, versus previous guidance of 10 percent to 11 percent.
The company’s brands include Hanes, Champion, Playtex, DIM, Bali, Maidenform, JMS/Just My Size, L’eggs, Wonderbra, Nur Die/Nur Der, Lovable and Gear for Sports.
