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Hanesbrands (HBI) Looks Good, Banks on Strategic Initiatives
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Hanesbrands Inc. (HBI - Free Report) looks good on the back of its brand portfolio, strong e-Commerce business and strategic initiatives. Further, management launched a Project Booster Program in the first quarter of 2017 in order to drive investment for growth, minimize costs as well as increase cash flow. Let’s delve deep to find what’s working well for the stock.
Growth Endeavors
Armed with a robust brand portfolio of well-recognized brands, Hanesbrands is the leading player in innerwear, casual wear and active wear markets in the U.S. Notably, the company’s flagship brand, Hanes, commands a major market share in the intimate apparel sector. In addition, management strengthens its brands by collaborating with several renowned designers that helps the company to increase its customers’ value.
We note that the recently launched Project Booster Program is a multiyear program, which is likely to boost the company’s Sell More, Spend Less, Generate Cash strategy for additional gains, mainly from the global commercial and supply chain scale through acquisitions. Moving ahead, 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. Further, this reinvestment should generate approximately $100 million in a run rate of net annualized savings that will begin by the end of 2019.
In addition, the Project Booster cost savings along with working capital initiatives are estimated to produce an additional annual run rate of $300 million of cash from operations by the end of 2019. Further, this program, including the headcount reductions, is anticipated to be cost neutral for 2017. Meanwhile, the company’s Innovate-to-Elevate strategy is helping the company to focus on value-added, higher-priced and high-margin items that can be supplied at lower costs.
Moreover, Hanesbrands is making strategic acquisitions to expand its business portfolio and in turn, grab market share. In fact, Hanesbrands’ strong e-Commerce business is a positive. Moving ahead, management plans to utilize its size and scale to boost supply chain optimization along with the investment in its domestic distribution center network in order to cater to the online channel efficiently.
Hurdles/Concerns
Hanesbrands has been witnessing lower-than-expected sales for the last few quarters, mainly due to soft sales at the brick-and-mortar stores. In fact, its sales have missed the Zacks Consensus Estimate in 12 of the past 13 quarters, including the last reported quarter.
Additionally, the company remains exposed to unfavorable foreign currency translations as nearly one-third of its total sales come from international businesses. In fact, currency is expected to negatively impact the company’s results, going forward.
We expect Hanesbrands to overcome these hurdles efficiently by its strategic initiatives and thereby become investors’ favorite stock. It is to be noted that Hanesbrands shares space with Cherokee Inc. , G-III Apparel Group, Ltd. (GIII - Free Report) and Tailored Brands, Inc. .
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Hanesbrands (HBI) Looks Good, Banks on Strategic Initiatives
Hanesbrands Inc. (HBI - Free Report) looks good on the back of its brand portfolio, strong e-Commerce business and strategic initiatives. Further, management launched a Project Booster Program in the first quarter of 2017 in order to drive investment for growth, minimize costs as well as increase cash flow. Let’s delve deep to find what’s working well for the stock.
Growth Endeavors
Armed with a robust brand portfolio of well-recognized brands, Hanesbrands is the leading player in innerwear, casual wear and active wear markets in the U.S. Notably, the company’s flagship brand, Hanes, commands a major market share in the intimate apparel sector. In addition, management strengthens its brands by collaborating with several renowned designers that helps the company to increase its customers’ value.
We note that the recently launched Project Booster Program is a multiyear program, which is likely to boost the company’s Sell More, Spend Less, Generate Cash strategy for additional gains, mainly from the global commercial and supply chain scale through acquisitions. Moving ahead, 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. Further, this reinvestment should generate approximately $100 million in a run rate of net annualized savings that will begin by the end of 2019.
In addition, the Project Booster cost savings along with working capital initiatives are estimated to produce an additional annual run rate of $300 million of cash from operations by the end of 2019. Further, this program, including the headcount reductions, is anticipated to be cost neutral for 2017. Meanwhile, the company’s Innovate-to-Elevate strategy is helping the company to focus on value-added, higher-priced and high-margin items that can be supplied at lower costs.
Moreover, Hanesbrands is making strategic acquisitions to expand its business portfolio and in turn, grab market share. In fact, Hanesbrands’ strong e-Commerce business is a positive. Moving ahead, management plans to utilize its size and scale to boost supply chain optimization along with the investment in its domestic distribution center network in order to cater to the online channel efficiently.
Hurdles/Concerns
Hanesbrands has been witnessing lower-than-expected sales for the last few quarters, mainly due to soft sales at the brick-and-mortar stores. In fact, its sales have missed the Zacks Consensus Estimate in 12 of the past 13 quarters, including the last reported quarter.
Additionally, the company remains exposed to unfavorable foreign currency translations as nearly one-third of its total sales come from international businesses. In fact, currency is expected to negatively impact the company’s results, going forward.
We expect Hanesbrands to overcome these hurdles efficiently by its strategic initiatives and thereby become investors’ favorite stock. It is to be noted that Hanesbrands shares space with Cherokee Inc. , G-III Apparel Group, Ltd. (GIII - Free Report) and Tailored Brands, Inc. .
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>