Winston-Salem, NC—Due to continued struggles with high cotton prices and costs relating to selling off its European imagewear division, HanesBrands reported Tuesday that its second quarter profit plunged 99%.
For the quarter ended June 30, the apparel and hosiery maker reported a profit of $1.23 million, or 1 cent a share, down from $86.8 million, or 89 cents a year earlier.
Earlier this year, the company sold off its European imagewear division and said it would exit the private-label category in the United States and its Outer Banks brand, which are now classified as discontinued operations. Earnings from continuing operations totaled 67 cents a share.
Net sales edged up 1.1% to $1.18 billion buoyed by sales growth in both its Innerwear and Outerwear segments. Gross margin narrowed to 31.1% from 35.1%, reflecting higher cotton costs.
Analysts’ average estimate expected earnings of 49 cents a share on sales of $1.25 million.
‘Well Positioned’ for Second Half
“Our business had a solid quarter, and we are performing slightly ahead of our plans for the year, especially in the Innerwear segment,” Richard A. Noll, chairman/ceo, said. “While we still have a long way to go, we are well positioned for the second half of the year.”
The company’s Innerwear division, which includes hosiery, increased 2.2% to $664.9 million helped by “decent performance” in men’s underwear, women’s panties and socks. Operating profit in the segment went up 17.9% driven by profitable bra and panty business that offset high cotton cost, the company said.
Outerwear sales rose 1.2% to $295.4 million where sales of Champion activewear and new Hanes casualwear were partially offset by lower sales in branded printwear.
Sales at HanesBrands’ International segment slipped 1.8% to $125.7 million. On a constant currency basis, International net sales increased 5% and operating profit increased 10%. With the sale of its European imagewear operations, the company has no exposure to the European market.
Direct to Consumer division sales declined 3% to $94.6 million.
Looking ahead, HanesBrands expects its full year net income to range between $2.50 to $2.60 a share, with total sales in the range of $4.52 billion to $4.57 billion.