Hanesbrands Fiscal Q1 Results Boosted by Gear For Sports Acquisition

 

The Winston-Salem, NC-based apparel marketer and manufacturer reported total sales surged 11.7 percent to $1.04 billion from $927.8 million a year ago as acquisition contributions, organic growth and ¡°operational efficiency¡± drove quarterly results against a year-ago period when the company recorded a healthy 8.2% top-line growth. Hanesbrands said earnings improved 31.8 percent to $48.1 million, or 49 cents per diluted share, compared to earnings of $36.5 million, or 37 cents per share, in Q1 last year.

¡°We significantly beat our expectations in the quarter and are off to a strong start in 2011,¡± Hanes¡¯ Chairman and CEO Richard A. Noll said.
Growth for the quarter came from particularly strong results from the Outerwear and International segments. As noted, the Outerwear segment¡¯s Gear For Sports business, which was acquired in November of last year, contributed 5 percentage points of the company¡¯s 12 percent sales gain and accounted for 3 cents of the 12 cent increase in EPS.
Outerwear segment sales increased 36.7 percent to $330.7 million with across-the-board strength in Gear For Sports, wholesale casualwear (Hanes), retail casualwear (Just My Size and Hanes), and retail activewear (Champion). The segment¡¯s operating profit increased more than threefold as a result of overall segment strength and the higher margins of Gear For Sports.

For the International segment, revenues jumped 23.6 percent to $127.0 million with strength in all geographies, including Canada, Latin America, Asia and Europe. Segment operating profit grew 86.0 percent.

For the Innerwear business, which is the company¡¯s largest segment, revenues improved slightly to $451.3 million against a year-ago period that included more than $30 million of new program shipments.

 

Management noted that increases in socks and male underwear were offset by a decline in women¡¯s intimates. The segment¡¯s operating profit declined 23.3 percent, which management attributed partially to the fact that price increases were only implemented during two-thirds of the quarter.

Among other consolidated results, the company¡¯s gross margin improved 60 basis points to 9.8 percent for the quarter despite higher cotton costs and commodity costs of $35 million. Cotton costs for the first quarter were 83 cents per pound, up from 52 cents a year ago.
Regarding outlook, the company¡¯s new guidance for net sales is $4.9 billion to $5 billion, up from previous guidance of $4.85 billion to $5 billion. The company has raised its EPS guidance to $2.70 to $2.90, up from previous guidance of $2.60 to $2.80.

The company expects quarterly double-digit net sales growth for the remainder of the year. Management said primary contributors are expected to be price increases partially offset by demand elasticity, the Gear For Sports acquisition (¡Ö5 points of growth), and net shelf-space and consumer spending increases (¡Ö1 to 2 points each).