HanesBrands Q4 Profit Jumps 49% as Sales Cross Category Rise

In What's New, Industry News by Jeff Prine

hanesjanWinston Salem, NC—HanesBrands Inc. said Thursday that its fourth quarter earnings beat estimates helped by acquisitions and double-digit sales increases.

For the quarter ended Jan. 3, the apparel and hosiery maker posted earnings per share of $1.49 ahead of analysts’ average estimate for $1.45 a share. Strong sales and higher margins helped push the profit up 49% from the prior-year quarter. Adjusted earnings per share exclude pre-tax charges of $69 million related to the acquisitions of Maidenform Brands and DBApparel (DBA), as well as other initiatives.

Net revenues gained 18% to $1.52 billion, “driven by more than high single-digit growth in all the segments.” The increase barely missed estimates for $1.55 billion in sales. Zacks Consensus Estimate of $1.55 billion.

According to HanesBrands, sales were helped by its acquisition of Maidenform, which contributed $491 million to total 2014 sales. Similarly, DBA Apparel, a more recent acquisition, contributed $291 million to sales.

Operating profit increased 31% to $200 million year over year. Operating margins increased 140 basis points to 14.3%.

“We had another outstanding year in 2014, generating significant shareholder value and again achieving record results for sales, operating profit and EPS,” Chairman/CEO Richard A. Noll said. “We are in the midst of a multiyear period of strong growth supported by our powerful company-owned global supply chain, Innovate-to-Elevate product platforms, and acquisitions. Our guidance for 2015 translates into another year of double-digit EPS growth and what would be another record year for sales, profit and EPS, despite the challenges of currency exchange rates.”

By division, Innerwear (includes hosiery) sales remained flat year over year at $699.7 million as softness in bras and hosiery offset the sales increase in basics. Operating profit increased 18% driven by supply chain efficiencies and synergies from the Maidenform takeover.

Negative Currency Effects Ahead

Activewear: Sales in this segment went up 10% from the year-ago period to $372.9 million on the back of strong performance by almost all its categories. Operating profit increased 10%, driven by lower markdowns offered by the company during the quarter.

International: This segment witnessed 149% surge in sales to $341 million despite the negative impact of foreign currency movements. On a constant currency basis, sales went up 157%. Operating profit skyrocketed 236%, driven by higher sales volumes.

Direct to Consumer: Sales in this segment went up 1% to $11.96 million backed by the Maidenform acquisition. Operating profit increased 29% driven by higher sales volumes.

Looking ahead to its 2015 forecast, HanesBrands expects to feel the effects of negative currency. Net sales were forecast in the range of $5.775 billion to $5.825 billion, up 9% from fiscal 2014. Operating profit is expected in the range of $835 million to $855 million, up 9% to 12% from fiscal 2014. Earnings per share are expected to range within $6.30 to $6.50, up 11% to 15% from fiscal 2014.

The guidance is in line was in line with analysts’ consensus.

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