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Q3 2013 Earnings Call
October 30, 2013 4:30 pm ET
Richard A. Noll - Chairman and Chief Executive Officer
Gerald W. Evans - Chief Operating Officer
Richard D. Moss - Chief Financial Officer
Matthew McClintock - Barclays Capital, Research Division
Eric B. Tracy - Janney Montgomery Scott LLC, Research Division
Omar Saad - ISI Group Inc., Research Division
Susan K. Anderson - FBR Capital Markets & Co., Research Division
Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division
Scott D. Krasik - BB&T Capital Markets, Research Division
David J. Glick - The Buckingham Research Group Incorporated
Taposh Bari - Goldman Sachs Group Inc., Research Division
Carla Casella - JP Morgan Chase & Co, Research Division
Previous Statements by HBI
» Hanesbrands Inc. Discusses Q3 2013 Results (Webcast)
» Hanesbrands Management Discusses Q2 2013 Results - Earnings Call Transcript
» Hanesbrand, Inc. (HBI) Management Discusses Q2 2013 Results (Webcast)
I would now like to introduce our first speaker for today, Mr. T.C. Robillard, Vice President of Investor Relations. Sir, please go ahead.
Thank you. Good afternoon, everyone, and welcome to the HanesBrands Quarterly Investor Conference Call and Webcast. We are pleased to be here today to provide an update on our progress after the third quarter of 2013. Hopefully, everyone has had a chance to review the news release we issued earlier today. The news release and the audio replay of the webcast of this call can be found in the Investors section of our hanes.com website.
I want to remind everyone that we may make forward-looking statements on the call today, either on our prepared remarks or in the associated question-and-answer session. These statements are based on current expectations or beliefs 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 and may be found on our website, as well as in 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.
Please also note that our full year guidance for 2013 and our preliminary EPS estimates for 2014 include expected Maidenform performance contributions and exclude certain onetime charges associated with the Maidenform acquisition. Additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP, can be found in today's press release, which is available on the Investors section of our hanes.com website.
With me on the call today are Rich Noll, our Chief Executive Officer; Gerald Evans, our Chief Operating Officer; and Rick Moss, our Chief Financial Officer. For today's call, Rich will highlight a few big picture themes, Gerald will provide a sense of what is happening in our businesses and Rick will emphasize some of the financial aspects of our results.
I will now turn the call over to Rich.
Richard A. Noll
Thank you, T.C. Let me start by saying we had another great quarter. We saw margins expand 200 basis points. We achieved record earnings for the second quarter in a row, and we gained share during the back-to-school selling period. Our strong performance is driven by our ability to execute on the things we can control, as well as the success of our Innovate-to-Elevate strategy, which is delivering results better and faster than we anticipated.
Even though we gained share, the overall retail environment during back-to-school was weak, ultimately impacting our Q3 sales. This retail weakness is causing many retailers to feel cautious about the upcoming holiday season. Therefore, we are going to be prudent and take a very conservative sales view in the fourth quarter. But even in spite of this prudent macro view, we are raising our operating profit and earnings guidance for the second consecutive quarter based on the improved profitability and the continued momentum in our business.
The success of our Innovate-to-Elevate strategy gives us the confidence to take the high end of our EPS range up by $0.20, with about half of the increase coming from an improved profit outlook in the fourth quarter.
When you add Maidenform to this momentum, we feel very good about the remainder of 2013 and for 2014. In fact, we are also increasing 2014's target EPS range to $4.25 to $4.50.
I'm going to focus the remainder of my comments on the Maidenform acquisition, and let Gerald and Rick talk about the near-term performance of our business. We closed the acquisition on October 7 and, just as we expected, their business continued to deteriorate all year long with a current projection for this year's revenue of approximately $550 million and operating profit in the low $30 million range, which is very much in line with our assumptions and was already incorporated into the guidance we gave you last July.
But don't focus on these current trends, it's what we can do with the business that counts. And the closer I get to their business, the more confident I feel about achieving our long-term profit goal. We knew exactly what needs to be done to cut costs and to drive profitable sales.
We made tremendous progress on the integration in the 90 days since signing the deal and in the past 3 weeks since closing. By the end of the first week, we were already selling Maidenform's products on our e-commerce sites and in over 100 of our own outlet stores. By the second week, we finalized the vast majority of the organizational decisions and communicated them to all of the Maidenform employees. The simplest way to conceptualize this integration is that we bought the brand and the business, but we're going to close the company. We will keep the things they do well, particularly intimate sales, design and merchandising, but we will rationalize where we have a competitive advantage. Therefore, the majority of the synergies will come from the elimination of their corporate overhead and the absorption of their distribution supply chain functions into our existing low-cost global network.