HanesBrands Misses Q4 Forecast on Slower December Sales

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Low-cut cushion socks from Hanes brand

Winston-Salem, NC—Despite a 46% increase in its fourth quarter net income, HanesBrands’ earnings report missed Wall Street expectations as sales slowed during December–except in socks.

For the quarter ended Dec. 31, the company posted a profit of $41 million, or 41 cents a share, up from $28.1 million, or 29 cents per share, in the prior year quarter. Analysts’ average estimate, however, was for earnings of 51 cents a share.

Net sales decreased slightly to $1.15 billion, but still falling below the $1.24 billion that analysts’ average estimated.

According to Richard Noll, the company’s chairman/ceo, the missed results were due “an unexpected and substantial slowing of orders in December” as key retailer tightly managed their inventories during a warmer than usual holiday season.

By division, hosiery posted a 0.8% increase while the international segment was up 0.6%, Declines were reported in the following divisions: 1.6% in Direct to consumer, 0.7% in Innerwear and 0.6% in Outerwear. However, sock sales posted almost double-digits rise with strong growth in both Hanes and Champion brands.

2012: ‘Challenges of Inflation’

“We achieved record earnings and sales in 2011 with strong performance in several of our categories, including underwear and socks, although we were disappointed with late fourth-quarter softness that yielded results below our expectations,” Noll said Wednesday. “For 2012, we expect to get through the challenges of the inflation overhang and Outerwear wholesale issues while we focus on core growth and delivering strong free cash flow that will be used to reduce long-term debt.”

HanesBrands projected up too a 35 cent loss in the first quarter related to those factors. As a result, the company lowered its fiscal 2012 earnings range to $2.50 to $2.60 a share compared with $2.69 from fiscal 2011.

Noll told analysts on a conference call that he was confident that other core categories will grow in revenue during 2012, benefiting from expanded shelf space with key retailers and the fact that the company successfully raised prices three times last year.

HanesBrands also said it prepaid $200 million of floating-rate notes in the fourth quarter, reducing its long-term debt to $1.8 billion. It expects to pay off $300 million in floating-rate notes in 2012.


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