Hanesbrands Inc., the parent of Champion, reported fourth-quarter profit fell 64%, hurt by lower sales and by charges related to its restructuring activities. Profit for the quarter ending Jan. 3 fell to $17.9 million, or 19 cents per share, from $49.8 million, or 52 cents per share a year earlier.
The company said that excluding restructuring activities, non-GAAP diluted EPS increased by 32% to 50 cents a share from 38 cents a year ago. Hanesbrands said the quarter benefited from favorable selling, general and administrative expense timing and one-time retroactive duty refunds.
Revenue fell 11% to $1.04 billion from $1.16 billion last year. Sales declined in each business segment. By the end of the fourth quarter, it said sales weakness “was broad-based, although a few of the bright spots for the year were men's underwear, Champion brand sales, Playtex brand intimate apparel sales, and the International segment.”
For the full year, net earnings rose slightly to $127.2 million, or $1.35 a share, from $126.1 million, or $1.30, a year ago. Sales for the full fiscal year declined by 5% to $4.25 billion
Excluding restructuring actions, non-GAAP diluted EPS for the full year increased by 27% to $2.09, which exceeded the company's growth goal for the year “despite severe economic conditions, particularly the consumer market collapse in the fourth quarter.” The earnings growth was driven by strategic execution that reduced costs, lowered base interest rates, lowered income tax expense, and reduced long-term debt.
Hanesbrands noted that it prepaid $139 million of long-term debt in the fourth quarter, compared with its goal of $75 million to $125 million. The company ended the year with inventory of $1.3 billion, approximately $50 million better than its goal. And the company ended the year with a similar level of cushion in its bank covenant debt-to-EBITDA ratio as it had at the end of the third quarter.
“We are pleased with our accomplishments in a year in which we faced rising commodity costs and an unprecedented collapse in the consumer retail sales environment,
Hanesbrands Inc., the parent of Champion, reported fourth-quarter profit fell 64%, hurt by lower sales and by charges related to its restructuring activities. Profit for the quarter ending Jan. 3 fell to $17.9 million, or 19 cents per share, from $49.8 million, or 52 cents per share a year earlier.
The company said that excluding restructuring activities, non-GAAP diluted EPS increased by 32% to 50 cents a share from 38 cents a year ago. Hanesbrands said the quarter benefited from favorable selling, general and administrative expense timing and one-time retroactive duty refunds.
Revenue fell 11% to $1.04 billion from $1.16 billion last year. Sales declined in each business segment. By the end of the fourth quarter, it said sales weakness “was broad-based, although a few of the bright spots for the year were mens underwear, Champion brand sales, Playtex brand intimate apparel sales, and the International segment.”
For the full year, net earnings rose slightly to $127.2 million, or $1.35 a share, from $126.1 million, or $1.30, a year ago. Sales for the full fiscal year declined by 5% to $4.25 billion
Excluding restructuring actions, non-GAAP diluted EPS for the full year increased by 27% to $2.09, which exceeded the companys growth goal for the year “despite severe economic conditions, particularly the consumer market collapse in the fourth quarter.” The earnings growth was driven by strategic execution that reduced costs, lowered base interest rates, lowered income tax expense, and reduced long-term debt.
Hanesbrands noted that it prepaid $139 million of long-term debt in the fourth quarter, compared with its goal of $75 million to $125 million. The company ended the year with inventory of $1.3 billion, approximately $50 million better than its goal. And the company ended the year with a similar level of cushion in its bank covenant debt-to-EBITDA ratio as it had at the end of the third quarter.
“We are pleased with our accomplishments in a year in which we faced rising commodity costs and an unprecedented collapse in the consumer retail sales environment,” Hanesbrands chairman and chief executive officer Richard A. Noll. “We successfully controlled year-end inventories, paid down debt, reduced costs, executed our supply chain strategy ahead of schedule, announced a price increase, and we delivered EPS growth of more than 25 percent for the year despite sales declines.
“We are now sharply focused on execution, conservative inventory and cost management and using available cash to pay down debt over the next 12 months. Our goal is to come out of this economic environment with momentum and as an even stronger company.”
Significant Supply Chain Progress
Hanesbrands said that in executing its global supply chain strategy of operating fewer, larger facilities in lower-cost countries, Hanesbrands reduced the number of company-owned and -operated manufacturing and distribution facilities in 2008 from 102 to 88. The company expanded its operations in Asia, adding three sewing plants in
In the fourth quarter, the company also acquired an embroidery and screen-print facility in
Additionally, the company improved its product quality by 27% and reduced complexity by eliminating 12% of its product SKUs.
Cost Reduction Progress
Hanesbrands said it made significant progress in its multiyear goal of generating gross savings that could approach or exceed $200 million. The company recognized approximately $76 million of the incremental gross savings in 2008.
The company is close to completing its cumulative $250 million of restructuring expected in the three years ending in 2009. With the Barnwell plant closure plan, the company has announced 89 percent of its expected restructuring charges, or $222 million.
Strategic Debt Structure
Hanesbrands said it strategically improved its debt structure by increasing the percentage of its debt that is capped or at fixed-rates to 82 percent for 2009. The company ended the year with a bank covenant defined debt-to-EBITDA ratio of 3.3 times, affording the company similar cushion of meeting this covenant measure as it had at the end of the third quarter. Hanesbrands has been exploring and will continue to explore the multiple options available, including amendments to its credit facility, to ensure that it remains in compliance with its bank covenants in this uncertain economic environment.
2009 Environment
While Hanesbrands does not provide quarterly or annual EPS guidance, it expects the soft retail consumer environment to continue and does not expect macroeconomic conditions to be conducive to growth in 2009. However, factors that will mitigate the impact of sales volume challenges and expected pension cost increases include a domestic gross price increase being taken in the first quarter, lower commodity costs in the second half of the year, the ability to execute previously discussed discretionary spending cuts, and additional cost benefits from previous restructuring and related actions.
