Hanesbrands Kept at Outperform - Analyst Blog


On Dec 13, we reiterated our Outperform recommendation on apparel retailer Hanesbrands Inc. ( HBI ), following an optimistic guidance for the upcoming quarter.  

Why Maintained at Outperform

Hanesbrands has been reporting decent results for the past few quarters backed by its strategic initiative - Innovate-to-Elevate. On Oct 31, 2013, Hanesbrands upped its earnings and sales guidance for the upcoming fourth-quarter fiscal 2013. In spite of delivering mixed results in the third quarter, Hanesbrands upped its guidance as it sees opportunity to expand its margins in the coming quarter backed by lower cotton costs and the Innovate-to-Elevate strategy, which focuses on high-margin products.

It raised its earnings per share guidance to a range of $3.75 to $3.85 from $3.50 to $3.65. Management expects the Maidenform acquisition to contribute 10 cents to the earnings upside during the quarter. It expects operating profits between $580 million and $590 million for the year, higher than the previous estimated range of $550 million to $575 million. It expects net sales slightly above $4.6 billion compared with $4.55 billion in the year-ago period.

Moreover, Hanesbrands raised the 2014 earnings per share target range to $4.25 to $4.50 from the low $4.00 range.

Hanesbrands' third-quarter 2013 earnings of $1.23 beat the prior-year quarter earnings and the Zacks Consensus Estimate by 10.8% and 7.8%, respectively. Although sales lagged the Zacks Consensus Estimate and year-ago results, operating profit climbed in double digits on the back of decreased cotton costs, favorable pricing and successful implementation of the Innovate-to-Elevate strategy.

We are also encouraged by the strategic acquisition of Maidenform Inc. completed in October. Maidenform sells intimate apparel products as a core category of Hanesbrands, which is particularly encouraging. The acquisition will bring Maidenform's popular brands like Flexees, Lilyette, Self Expressions and Sweet Nothings into Hanesbrands' already rich portfolio.

Moreover, with the acquisition, Hanesbrands will be able to expand its customer base to include the younger generation as average-figure bra business of Maidenform targeting younger buyers complements Hanesbrands' full-figure bra business targeting older women.

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 G-III Apparel Group, Ltd. ( GIII ), Michael Kors Holding Limited ( KORS ) and Marinemax Inc . ( HZO ). While G-III Apparel carries a Zacks Rank #1, Micheal Kors and Marinemax hold a Zacks Rank #2 (Buy).

G-III APPAREL (GIII): Free Stock Analysis Report

HANESBRANDS INC (HBI): Free Stock Analysis Report

MARINEMAX INC (HZO): Free Stock Analysis Report

MICHAEL KORS (KORS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: GIII , HBI , HZO , KORS



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