Hanesbrands Inc. ( HBI ) reported
first-quarter 2013 earnings per share of 51 cents compared to a
loss of 25 cents suffered in the comparable prior-year quarter.
Earnings beat the Zacks Consensus Estimate of 50 cents per share.
During the first quarter, earnings were on the upswing on the back
of success of the company's 'Innovate to Elevate' strategy that
focuses on value-added, higher-priced and higher-margin items that
can be supplied at lower cost.
Revenues and Operating Profits
Quarterly revenues slipped 3% to $945.0 million, due to lower
consumer demand, due to macroeconomic challenges. Revenues also
missed the Zacks Consensus Estimate of $957.0 million.
The gross profit surged 28.3% year over year to $327.3 million,
while gross profit margin inflated 140 basis points (bps) to 34.6%
in the fourth quarter. The increase in gross profit resulted from
positive pricing and shutdown of underperforming businesses.
Operating profit in the quarter increased significantly to $85.1
million froma loss of $10.6 million in the year ago quarter, given
lower selling, general and administrative expenses. Operating
profit margin expanded 790 bps to 9.0% on the back of lower cotton
costs and positive pricing and success of Innovate-to-Elevate
strategy, which helped improved the margins.
Innerwear : Net revenue for the Innerwear
segment slipped 2.4% year over year to $497.0 million in the
reported quarter due to soft retail environment. However, the
decline was partly offset by decent sales of socks and bra which
recorded sales growth in mid single-digits.
Operating profit in the segment shot up 69.0% year on year to
$89.7 million and margin inflated 760 bps to 18%.
Activewear: Outerwear segment sales
climbed 4% from the year-ago period to $267.2 million, driven by
strong sales of Hanes branded products, including
T-shirts, fleece and graphic apparel, as well as Champion
branded products. Results excluded the decline in branded printwear
sales, which the company is in the process of phasing out.
Activewear reported operating profit of $21.3 million compared
to a loss of $18.7 million suffered a year ago.
International : Net sales in the International
segment slipped 5.3% to $101.2 million in the quarter. Foreign
exchange headwinds primarily hurt the segment results. Excluding
currency, revenues in this segment increased 1% in the quarter.
Operating profit, however, declined 53.0% to $2.3 million in this
Direct to Consumer : Direct to Consumer segment
sales declined 5.5% to $80.1 million and operating profit was $1.3
million compared to a loss of $7.6 million incurred a year ago.
Other Financial Updates
The company exited the first quarter of 2013 with cash and cash
equivalents of $68.5 million compared with $42.8 million in the
previous quarter. Long-term debt was $1.4 billion in the first
quarter of 2013 compared with $1.3 billion in the fourth quarter of
Hanesbrands' board will pay a dividend of 26 cents that implies
a yield of 58.6%, on Jun 3 to its shareholders as of May 20. The
company is committed to use the excess cash to return value to its
shareholders. Hanesbrands intends to use almost 20% to 25% of its
free cash flow to pay dividend.
Winston-Salem, NC-based Hanesbrands is geared to maximize
returns to shareholders. Apart from paying in the form of
dividends, the company also intends to repurchase shares, although
it is yet to formulate its share-buyback strategy.
For full year 2013, the company reaffirmed its sales guidance of
$4.6 billion. It expects operating profits between $500 million and
$550 million for the year. Earnings are expected to lie within the
band of $3.25 to $3.40 per share.
HBI estimates net sales of branded printwear to decline by $40
million to $50 million for 2013. Free cash flow is expected to be
approximately $350 million to $450 million.
Hanesbrands engages in the marketing of innerwear, outerwear and
hosiery apparel and carries a Zacks Rank #2 (Buy). Other companies
in the same industry are Joe's Jeans Inc. ( JOEZ ), Ralph
Lauren Corporation ( RL ) and Under
Armour Inc. ( UA ) , all of which have
a Zacks Rank #2 (Buy).HANESBRANDS INC (HBI): Free Stock Analysis
ReportJOES JEANS INC (JOEZ): Free Stock Analysis
ReportRALPH LAUREN CP (RL): Free Stock Analysis
ReportUNDER ARMOUR-A (UA): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment