Hanesbrands raised its earnings and sales guidance for 2016 based on expectations of increased synergies from two pending acquisitions – Pacific Brands and Champion Europe – as well as debt refinancing.
The acquisition of Champion Europe is expected to close in late June, and Pacific Brands Limited in July.
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, earnings per share (EPS) is expected in the range of $1.51-$1.57, compared with previous guidance of $1.63-$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-$1.95, up from previous guidance of $1.85-$1.91, and operating profit is expected to be in the range of $940 -$975 million, up from previous guidance of $920-$950 million.
On an annualized basis, the acquisitions of Champion Europe and Pacific Brands are expected to contribute approximately $800 million in net sales and approximately $70 million in operating profit before synergies. Annualized interest expense to fund the acquisitions are expected to be $40 million. Due to the timing of the closings and the seasonality of the businesses, Hanes expects to benefit from approximately one-third of annualized profitability in 2016 while incurring approximately three-fourths of annualized interest expense.
The guidance also reflects debt refinancing and the tax-rate effect of the new FASB Accounting Standards Update related to accounting for stock compensation and excludes Pacific Brands’ Tontine pillow and Dunlop Flooring businesses that are being divested. 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.
“Our Sell More, Spend Less and Make Acquisitions strategy continues to create value,” said Hanes Chief Operating Officer Gerald W. Evans Jr. “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.”
The company updated its guidance due to an appearance at an investor meeting last week. 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.
