HanesBrands Q3 Profit Up 14% on Better Margins

In What's New, Industry News by Jeff Prine

Hanes HosieryWinston-Salem, NC—HanesBrands saw its third quarter profit rise 14% thanks to stronger margins and despite currency fluctuations that weighed on its revenue.

For the quarter ended Sept. 28, HanesBrands posted net income of $125.3 million, or $1.23 a share, compared to $109.9 million, or $1.09 a share, last year. Analysts’ average estimate expected $1.13 a share.

Net revenue decreased 1.8% to $1.2 billion, but was down by less than 1% excluding currency fluctuations. Analysts expected sales of $1.24 billion.

Net sales for three of HanesBrands’ four main categories were down, too. Innerwear sales, particularly socks and men’s underwear, decreased 2.5% to $560.1 million. Activewear fell 1.9% to $405.1 million, international sales were off 0.1% to $132.1 million, while direct-to-consumer sales were up 0.9% to $100 million.

Maidenform Acquisition Adds to Forecast

Gross margin expanded to 35.2%, up 240 basis points compared with last year’s quarter, and operating margin improved to 14.8%, a 200-basis-point expansion “even with the company increasing its media investment by $8 million in the quarter.”

The company credited its “Innovate-to-Elevate strategy,” which combines brand power, supply chain savings and product innovation, to helping “drive both core-product and new-product success, resulting in share gains.”

According to Richard Noll, chairman/ceo, “our brands are gaining share, our supply chain is generating savings, and our product innovations are creating value. Given our strong earnings momentum, we are raising our earnings guidance for both 2013 and 2014 despite a soft retail environment.”

HanesBrands now expects adjusted full year earnings between $3.75 to $3.85 a share and net sales of slightly more than $4.6 billion—that’s an increase from its previous forecast for $3.50 to $3.65 a share with revenues of about $4.55 billion.

The guidance includes performance expectations for the recently-acquired Maidenform Brands

The guidance includes performance expectations for the recently acquired Maidenform Brands, which HanesBrands bought for $583 million to complement its intimate apparel business.

As a result of the acquisition, HanesBrands expects integration-related expenses of $120 million to $140 million, with $50 million to $60 million of the charges occurring in the fourth quarter and the remainder during 2014. Close to half of Maidenform’s 1,330 global workforce will be phased out over the next 12 months.

“We are confident in our guidance for 2013 and believe a reasonable per-share earnings goal, excluding actions for 2014, is $4.25 to $4.50,” Noll added. Analysts expect per-share earnings of $4.29.


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