) reported third-quarter 2013 earnings per share of $1.23, up
10.8% from the comparable prior-year quarter. Earnings beat the
Zacks Consensus Estimate of $1.14 by 7.8%.
Even though revenues did not favor the earnings growth, the
upswing was driven by higher margins backed by the success of the
'Innovate-to-Elevate' strategy implemented by the company. The
strategy focuses on value-added, higher-priced and higher-margin
items that can be supplied at lower cost.
Revenues and Operating Profits
Quarterly revenues slipped 1.8% to $1.19 billion, backed by
lower sales in almost all the business segments. Revenues,
however, lagged the Zacks Consensus Estimate of $1.23 billion due
to sluggish retail environment.
However, both the core products and new products of HBI gained
share during the quarter backed by success of the
Gross profit surged 5.4% year over year to $421.7 million,
while gross profit margin inflated 240 basis points (bps) to
35.2% in the third quarter backed by lower cost of sales.
Operating profit in the quarter shot up 13.0% to $176.9
million from $156.5 million in the year-ago quarter. Operating
profit margin expanded 200 bps to 14.8% mainly due to lower
cotton costs, favorable pricing and successful implementation of
the Innovate-to-Elevate strategy.
Net revenue for the Innerwear segment slipped 2.5% year over year
to $560.1 million in the reported quarter mainly due to lower
retail sales in the back-to-school period.
Although operating profit in the segment declined 0.2% year on
year to $99.9 million, margin inflated 40 bps to 17.8% due to
share gains of most of the brands like Hanes socks, Bali bras and
panties, Polo underwear, and Hanes, Playtex and Just My Sizebras
of the segment.
Socks and bras also performed well during the quarter. Sales
grew in September, but the growth was slow as the retailers
reduced orders due to low August sales.
: Activewear segment sales went down 1.9% from the year-ago
period to $405.1 million, due to a decline in branded Printwear
sales. The sales in the category declined as it is in the process
of phasing out its low-margin products.
The segment reported operating profit, up 39.1% to $68.6
million compared to $49.3 million a year ago. Operating margin
improved 500 bps to 16.9% backed by double-digit margin gains in
retail activewear and Gear for Sports categories of the segment.
Moreover, profit in brands like Champion and Hanes, as well as
the shift of focus from less profitable elements of Branded
Printwear business resulted in margin gains during the
: Net sales in the International segment slipped 0.1% to $132.1
million in the quarter. Foreign exchange headwinds primarily hurt
the segment results. Excluding currency, revenues in this segment
increased 10% in the quarter. Operating profit, however, slipped
6.2% to $16.6 million due to unfavorable currency
Direct to Consumer
: Direct to Consumer segment's sales remained almost flat at
$100.0 million reflecting soft retail conditions in the country.
However, operating profit surged 29.2% to $16.2 million compared
with the year-ago level.
Other Financial Updates
The company exited the third quarter of 2013 with cash and
cash equivalents of $132.3 million compared with $82.3 million in
the previous quarter. Long-term debt was $1.25 billion in the
third quarter of 2013 compared with $1.37 billion in the previous
On Oct 7, 2013, Hanesbrands completed the takeover of the
underwear apparel chain, Maidenform Brands Inc., for
approximately $583 million. The acquisition was funded with cash
and cash equivalents and short-term borrowings through revolving
credit facilities. The revolving credit facilities are expected
to be retired through Hanesbrands' free cash flow.
The acquisition brings Maidenform's popular brands like
Flexees, Lilyette, Self Expressions and Sweet Nothings and
Hanesbrands' market leading brands like Playtex, Bali, Just My
Size, Hanes, Barely There, Wonderbra, Champion and L'eggs under
one banner. It will also give HBI a competitive edge over
Limited Brands Inc
The acquisition is expected to be accretive to Hanesbrands'
earnings in the first 12 months. Moreover, it is expected to
generate additional revenues of $500 million, 60 cents in
earnings per share, $80 million of operating profit and $65
million of free cash flow.
For full-year 2013, the company raised its guidance backed by
decent year-to-date results. It raised its earnings per share
guidance to a range of $3.75 to $3.85 from $3.50 to $3.65. It
expects operating profits between $580 million and $590 million
for the year, higher from previous estimated range of $550
million to $575 million. It expects net sales slightly above $4.6
billion compared to $4.55 billion as estimated earlier.
Moreover, HBI raised its 2014 earnings per share target range
to $4.25 to $4.50, compared to the low $4 range provided
Hanesbrands engages in the marketing of innerwear, outerwear
and hosiery apparel and carries a Zacks Rank #1 (Strong Buy).
Other companies in the same industry are
Ralph Lauren Corporation
Michael Kors Holding Limited (
that hold a Zacks Rank #2 (Buy).
HANESBRANDS INC (HBI): Free Stock Analysis
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L BRANDS INC (LTD): Free Stock Analysis
RALPH LAUREN CP (RL): Free Stock Analysis
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