HanesBrands reported revenues in its Activewear segment rose 1.2 percent to $298.1 million but operating profits dipped 2.9 percent to $32.8 million.
Gear for Sports was the star with double-digit growth in sales and operating profits. Hanes also saw an increase. Those gains offset a decline at Champion due to slowing sales of the C9 by Champion line sold at Target that isn’t being offset yet by gains in other channels.
“In the sporting goods, mid-tier and department store channels, Champion has a significant amount of space gains this year,” said Gerald Evans, COO, on a conference call with analysts. “With many new programs shipping in the second quarter, we believe Champion is positioned for strong full-year growth. We were also encouraged by Champion's sell-through trends in the mass channel, which showed improvement in the quarter.”
In the Q&A session, Evans said he expects the Champion business to accelerate to show a gain in the mid-single digit rate for the full year with “strong double-digit growth” in department, specialty and mid-tier department stores. Last year, Champion grew in the first quarter by 62 percent in the department stores and sports specialty channels but this year new programs are landing in the second quarter.
“I think you'll see in that Champion department and sports specialty store business double-digit growth in the second quarter and you'll see that continue throughout the year,” said Evans.
Overall, HanesBrands reported revenues jumped 14.1 percent in the first quarter to $1.21 billion. Net earnings climbed 26.7 percent to $52.6 million, or 13 cents a share, although earnings excluding non-recurring items in both periods improved 16 percent to 22 cents a share.
In its other segments, Innerwear sales declined 4.4 percent to $546.2 million due to a retailer’s inventory reduction efforts but operating profits gained 13.0 percent to $110.8 million as a result of strong cost synergies tied to its acquisition of Maidenform. The segment also includes Playtex, DIM, Bali, Flexees, JMS/Just My Size and Wonderbra.
Direct to Consumer sales slid 2.6 percent to $81.5 million and widened its operating loss to $2.3 million from $1.3 million.
International sales vaulted 157.4 percent to $283.2 million due to the August-2104 acquisiton of DBApparel. Operating income improved 170.2 percent to $22.1 million. Strong contributions from DBApparel, Japan and Latin America offset currency headwinds and disruptions caused by Target’s exit from Canada.
Since the end of the first quarter, HanesBrands closed on the acquisition of Knights Apparel, a leading seller of licensed collegiate logo apparel in the mass retail channel.
Rich Noll, HanesBrands’ chairman and CEO, said the acquisition makes Hanesbrands the leading supplier of licensed collegiate apparel in both the mass and college bookstore channels.
“As we leverage the scale of our supply chain, the graphic art capabilities of our Gear for Sports business and our expertise in the mass channel, we believe we can double their operating profit to more than $40 million within the next two to three years,” Noll said. “Integration planning has already begun and we believe a large portion of the integration actions can be completed by the end of this year with synergies beginning to flow through our P&L in 2016.”
HanesBrands has increased its full-year 2015 guidance to reflect the expected contributions from Knights Apparel and has updated its expectations for currency exchange rates for the rest of the year. The new guidance includes the addition of approximately $160 million from Knights Apparel, offset by a reduction of roughly $35 million from additional pressure in various exchange rates.
For 2015, HanesBrands now expects net sales of approximately $5.9 billion to $5.95 billion; adjusted operating profit of $853 million to $873 million; and adjusted EPS of $1.61 to $1.66. The new guidance represents an increase over 2014 results of 10.9 percent to 11.8 percent for net sales, 12 percent to 14 percent for adjusted operating profit, and 13 percent to 17 percent for adjusted EPS.
