Hanesbrands Inc.
(
HBI
) reported third quarter 2012 earnings per share of $1.11, up 31%
from the prior-year quarter, on strong sales. Earnings outpaced
the Zacks Consensus Estimate of $1.05 per share.
Revenues and Operating Profits
Quarterly revenues inched up 2.5% to $1.219 billion, driven by
sales growth in both Innerwear and Outerwear segments. This was
almost in line with the Zacks Consensus Estimate of $1.224
billion.
Gross profit went down 3.4% year over year to $399.9 million
and gross profit margin shrank 210 basis points to 32.8% during
the third quarter. The decline in profit resulted from inflation
in cotton prices. However, operating profit in the quarter
climbed 8% to $156.5 million, driven by lower selling, general
and administrative expenses. Operating profit margin expanded 60
basis points to 12.8%.
Segment Details
Innerwear Segment
: Net revenue at the Innerwear segment increased 2.8% year on
year to $574.3 million in the reported quarter. The increase came
on the back of decent performance of men's underwear and women's
panties. The company introduced new products like Hanes
ComfortBlend men's underwear, Hanes Classics slim fit and stretch
premium underwear T-shirts, and Bali and Barely There Smart Size
seamless bras. Operating profit in the segment went up 9.6% year
on year to $96.8 million.
Outerwear segment:
Outerwear segment sales climbed 5.2% from the year-ago period to
$41.0 million, driven by strong sales of Champion activewear and
Gear for Sports apparels, partially offset by higher cotton
prices. Outerwear segment's operating profit reported a decline
of 4.2% to $46.3 million in the quarter.
International segment
: Net sales at International segment slipped 3.2% to $132.3
million in the quarter. The reason for decline in revenue was
foreign exchange headwinds. Excluding currency, revenue in this
segment increased 2% in the quarter. Operating profit, however,
jumped 18.8% to $17.6 million in this segment.
Direct to Consumer segment
: Direct to Consumer segment sales went up 1.6% to $99.1 million
and operating profit increased 17.5% to $14.4 million in the
quarter.
Other Financial Updates
The company exited the third quarter of 2012 with cash and
cash equivalents of $182.3 million compared with $29.7 million in
the previous quarter. Long-term debt was $1.5 billion compared
with $1.7 billion in the second quarter of 2012. Free cash flow
was $287 million in the quarter. The company completed the
retirement of approximately $300 million of floating-rate bond
debt as planned in 2012.
Guidance
For the fourth quarter, the company expects net sales in the
range of approximately $1.13 billion to $1.17 billion and
earnings per share (EPS) of $1.00 to $1.06. The company expects
gross margin percentage in the mid-30s and an operating profit
margin of slightly more than 13%. Interest expense is expected to
be approximately $33 million and the effective tax rate is
expected to be in the mid-teens.
For fiscal 2012, the company has upped the lower end of its
earnings guidance range to $2.54 - $2.60, compared with $2.50 -
$2.60 anticipated previously, thereby narrowing the range. The
company expects to increase its sales by approximately 2%
compared to previous guidance range of $4.52 billion -$4.57
billion. For 2012, the company now expects free cash flow to be
toward the higher end of the previous range of $400 million to
$500 million. The company's near-term priority for the usage of
free cash flow is to reduce long-term debt and de-leverage its
balance sheet.
Currently, Hanesbrands, which competes with
Limited Brands Inc.
(
LTD
), carries a Zacks #3 Rank (short-term Hold rating).
HANESBRANDS INC (HBI): Free Stock Analysis
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LIMITED BRANDS (LTD): Free Stock Analysis
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