We reaffirm our Outperform recommendation on
) following the appraisal of second-quarter fiscal 2013 results
wherein HBI's Innovate-to-Elevate strategy triggered modest
Why the Reiteration?
On Jul 31, 2013, Hanesbrands delivered second-quarter fiscal
2013 earnings which surpassed both prior-year quarter earnings
and the Zacks Consensus Estimate by 77.6% and 24%, respectively.
The upside was prompted by the success of HBI's
Innovate-to-Elevate strategy and lower comparable base in the
prior-year quarter due to higher cotton cost. Net sales also
benefited from strong results in the Innerwear segment.
Gross profit surged 18.7% backed by lower cost of sales
following shutdown of underperforming businesses. Lower cotton
cost benefited the company's operating profit margin which shot
up 51.3% year over year.
Following decent performance in the first half of fiscal 2013,
HBI raised its fiscal 2013 earnings per share guidance to a range
of $3.50 to $3.65 from its previous range of $3.25 to $3.40. We
are encouraged by HBI's increasing focus on core categories and
shutdown of underperforming segments. This will help Hanes boost
profit in the coming quarters.
HBI's takeover of Maidenform brands in Jul 2013 which sells
intimate apparel, a core category of Hanesbrands, 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, which carries a Zacks Rank #1 (Strong Buy), has
also entered into deals with several retailers which are
providing shelf space to the company's products. C9 brand by
Champion has an exclusive deal at
) under which the departmental chain shelves the active wear
garments under the brand.
) is increasing shelf space for Hanesbrands' men's underwear and
) introduced Hanes' products in its stores from Jun 2013. These
deals will help Hanes increase its market share in the coming
HANESBRANDS INC (HBI): Free Stock Analysis
MACYS INC (M): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
To read this article on Zacks.com click here.