Hanesbrands Inc.HBI has been a favorite among investors, courtesy of its strategic acquisitions, solid e-commerce business and cost-saving initiatives. Shares of this leading apparel manufacturer and seller have increased 26.2% in the past six months, outperforming the industry 's growth of 10.9%. The Consumer Discretionary sector, to which the company belongs, advanced 3.7% in the same period.
Let's now delve at some of the aspects aiding the company's performance.
Acquisitions Yield Favorably
In the recently reported second quarter of 2017, acquisition related synergies contributed approximately $220 million in net sales. These benefits were mainly related to Champion Europe and Hanes Australasia that had been completed in 2016.
Also, during the first quarter, buyouts contributed approximately $210 million toward net sales. In addition to strengthening business portfolio, buyouts have aided the company to gain greater infrastructural capabilities and cater to a wider apparel market.
E-commerce on the Rise
Hanesbrands' e-commerce platform has been reaping benefits from growing popularity of online shopping. In the second quarter, sales from online channel increased 25%. Online sales mainly benefitted from a 7% increase in Global Champion Activewear. Further, in order to cater to the needs of the online segment, management has been focusing on supply chain optimization and investing in domestic distribution center network.
Cost Savings Pave Way for Reinvestments
With a motive to generate growth investments, minimize costs and increase cash flow, Hanesbrands launched its Project Booster program in first-quarter 2017. By 2019, this project is anticipated to produce nearly $150 million of annualized cost savings, out of which roughly $50 million will be reinvested in targeted growth opportunities. Notably, this reinvestment should generate approximately $100 million in a run rate of net annualized savings that will begin by the end of 2019.
Also, the Innovate-to-Elevate strategy (which focuses on value-added, higher-priced and high-margin items that can be supplied at lower costs) continues to drive the company's adjusted operating profit margin and generate significant cumulative cash from operations.
Hanesbrands' organic sales have been declining at a decelerating rate and are expected to turn positive in the second half of the year. Moreover, back-to-school shipments are anticipated to fall in the third quarter which will result in higher sales. Hanesbrands also remains confident in attaining cost-saving targets. Owing to such upsides, the stock has a long-term growth rate of 10.7% and a VGM Score of B. Hanesbrands currently carries a Zacks Rank #3 (Hold).
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Investors may also want to consider few better-ranked stocks from the same sector. Central Garden & Pet Company CENT sports a Zacks Rank #1 (Strong Buy), while Guess? Inc. GES and lululemon athletica inc. LULU carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks Rank #1 stocks here .
Central Garden & Pet delivered an average positive earnings surprise of 122.1% over the trailing four quarters. It has a long-term earnings growth rate of 10%.
Guess? delivered an average positive earnings surprise of 20.6% over the trailing four quarters. It has a long-term earnings growth rate of 17.5%.
lululemon delivered an average positive earnings surprise of 8.5% over the trailing four quarters. It has a long-term earnings growth rate of 13.2%.
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