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Hanesbrands Inc. (HBI)
F3Q09 Earnings Call
October 28, 2009 5:00 pm ET
Brian Lantz - Vice President, Investor Relations
Richard A. Noll - Chief Executive Officer
E. Lee Wyatt, Jr. - Chief Financial Officer
Omar Saad - Credit Suisse
Jim Duffy - Thomas Weisel Partners
Scott Krasik - C.L. King & Associates
Rishi Parekh -Stern Agee
Eric Tracy - FBR Capital Markets
David Schmookler- Kingsland Financial Services
At this time, I would like to welcome everyone to the Hanesbrands third quarter 2009 earnings conference call. (Operator Instructions)
Previous Statements by HBI
» Hanesbrands Inc. Q4 2008 Earnings Call Transcript
» Hanesbrands Inc. Q3 2008 Earnings Call Transcript
» Hanesbrands, Inc. Q2 2008 Earnings Call Transcript
I want to remind everyone that we may make forward-looking statements on the call today, either in our prepared remarks or in the associated question and answer session. These statements are based on current expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially. These risks are detailed in our various filings with the SEC such as our most recent Forms 10-K and 10-Q as well as our news releases and other communications. The company does not undertake to update or revise any forward-looking statements which speak only to the time at which they are made.
Also, any references to gross margin, SG&A, operating profit, earnings per share, or EBITDA on today's call will focus on results excluding restructuring and other actions, unless otherwise specified.
With me on the call today are Rich Noll, our Chairman and Chief Executive Officer, and Lee Wyatt, our Chief Financial Officer. Rich will highlight our 2010 net space gains and give a summary of our business performance for the quarter. Lee with then provide further detail on the various aspects of our financial performance.
Following our prepared remarks, we have allowed ample time to address any questions that you may have.
Before I turn the call over to Rich, I want to take a moment to let everyone know that we are planning our third annual investor day on Tuesday, February 23, in New York. We will again have our extended management team review our achievements, strategies, and opportunities in detail. We will send the invitations out in the fourth quarter and we look forward to seeing all of you there.
I will now turn the call over to Rich.
Richard A. Noll
I am pleased with our performance through the recession and I am very optimistic about our potential in 2010. Overall, both the quarter and the year are unfolding as we stated and we continue to invest in our business. As a result, we are poised to begin 2010 with significant momentum.
We have secured substantial net space gains and program expansions that will result in approximately 5%, or $200.0 million of sales growth, in 2010. We are following a simple path to growth. While we were number one or number two in all our core categories, we are not number one or number two in all accounts or in all of our core programs. In 2010 we are growing our market share by capitalizing on these distribution opportunities, sort of filling in the holes in our distribution grid, so to speak.
Let me hit a few of the highlights. Our inner wear segment accounts for the majority of the increases, specifically men's underwear is benefitting from confirmed net space gains at all major accounts, including Target, Walmart and Macy's, plus new distribution of Dollar General, JP Penney's, and BJ's. These net gains should produce high, single-digit growth for men's underwear in 2010.
Intimate apparel also has substantial gains. We have confirmed expansions for bra programs at most major accounts, including Kohl's, Target, Walmart, and Macy's, as well as expansion across all of our brands.
Hanes panties are also gaining space in new distribution at major accounts. Overall intimate apparel gains should produce mid-single-digit growth in 2010. We are remaining in categories that have both space gains and losses, which are generally offset or provide low, single-digit gains.
Outerwear segment growth will be driven by the multi-year agreement with Walmart to significantly expand our Just My Size brand in casualwear. This program could provide $75.0 million in incremental casualwear sales in 2010, growing to $150.0 million over time.
Champion has confirmed space and distribution gains in sporting goods, department store, and mid-tier accounts.
The only segment with net losses is sheer hosiery. Retailers continue to reduce space in this category as the industry continues to decline.
Some of these programs began shipping in Q4 but the bulk of the programs start shipping in Q1, resulting in much of 2010's growth being weighted in the first half, therefore these new programs allow us to begin 2010 with top-line momentum, even if consumer spending does not rebound. If it does rebound, we have upside potential.
To support all of this growth we are very quickly increasing our production capacity. Our Nanjing textile facility started production this month, and we have secured additional capacity with outside contractors. These capacity expansions, coupled with our continued planned cost savings, will go a long way in 2010 in helping us achieve our annual operating expansion goal of 50 basis points to 100 basis points.