Aided in part by strong momentum for Champion in sporting goods and department store channels, HanesBrands Inc. racked up a robust fourth-quarter as well as record full-year profitability for the second consecutive year.
On an adjusted basis, earnings in the fourth quarter rose 49.1 percent to $148.7 million, or $1.46 a share. Adjusted earnings exclude acquisition, integration and other action-related charges in both periods, much of it tied to the acquisition of underwear and bra makers, Maidenform and DBApparel.
Net income in the quarter more than doubled to $89.4 million, or 88 cents a share, from $32.3 million, or 32 cents. Revenues climbed 18.4 percent to $1.52 billion.
Gross margins improved 340 basis points to 37.9 percent with DBA contributing approximately 180 basis points of the increase. The remainder was traced to efficiency gains in its supply chain and benefits from its effort to innovate and deliver premium product.
“The consumer environment remained choppy, but the overall trend was positive, and sell-through in November and December was stronger than October,” said Gerald Evans, COO, on a conference call with analysts.
For the full year, sales increased 15.1 percent to $5.3 billion. Adjusted earnings grew 45.1 percent to $577.6 million while net earnings rose 22.4 percent to $404.5 million, or $3.97.
In the Innerwear segment, revenues dipped 0.1 percent in the quarter to $699.7 million with growth in basics unable to offset softness in bras and hosiery. The segment includes Hanes basics, as well as Playtex, DIM, Bali, Maidenform, Flexees, JMS/Just My Size and Wonderbra. Segment operating profit rose 17.3 percent to $146.7 million, driven by supply chain efficiencies and synergies from Maidenform.
For the full year, sales in the Innerwear segment grew 18.2 percent and operating profit gained 10.7 percent.
In the Activewear segment, sales advanced 9.6 percent in the quarter to $373.0 million. Operating income increased 9.8 percent to $48.0 million.
Champion sales, excluding those at mass retail, increased more than 20 percent in the quarter
“We continue to gain space in Champion in the sporting goods and mid-tier channels, which is more than offsetting the challenges at mass, said Gerald Evans, COO, on a conference call. The division also includes Gear for Sports and some Hanes product.
Sales in the Activewear segment in the year rose 7.9 percent and operating profit increased 13.6 percent. That marked record full-year profitability for the second consecutive year and a 13.7 operating margin, up 70 basis points.
In the Direct to Consumer segment, sales inched up 0.9 percent in the quarter to $107.4 million and operating profits grew 28.7 percent to $12.0 million. Sales in the year grew 7.6 percent and operating income advanced 16.2 percent.
Due largely to the DBApparel acquisition, International segment revenues vaulted 148.4 percent to $341.6 million while operating profits added 227.7 percent to $36.7 million. The year's sales grew 61.0 percent with operating income ahead 110.0 percent.
Asked in the Q&A session to elaborate on Champion’s performance, Rich Noll, chairman and CEO, noted that the brand’s sales rose 8 percent in the fourth quarter for a 6 percent gain in the year.
Momentum for Champion in sporting goods and the department store channel has been “very strong.” Noll expects a similar “kind of rate” as the 20 percent growth seen in the fourth quarter to continue in 2015. He added, “We are gaining new shelf space and expanding our position in accounts that we are already in. And it's a combination of both innovation and expansion of our current style.”
Noll added that Champion’s overall performance is being impacted by “headwinds across the board in mass, and we anticipate there will still be some of that as we go into next year.” He said it’s not a Canada-specific issue,” referring to the ongoing exit from Canada of Target, which sells the successful C9 by Champion line.
HanesBrands expects another strong year in 2015, with revenue growth of approximately 9 percent, adjusted operating profit growth of 9 percent to 12 percent, and adjusted EPS growth of 11 percent to 15 percent. HanesBrands’ officials noted that the gains are expected “despite significant negative impacts from foreign currency exchange rates.”