Hanesbrands Inc.’s (HBI - Free Report) second-quarter 2016 earnings per share of 51 cents missed the Zacks Consensus Estimate of 52 cents by 1.92%. Earnings, however, improved 2% year over year on higher sales due to the Innovate-to-Elevate strategy.
The strategy focuses on value-added, high-priced and higher-margin items that can be supplied at lower costs. Benefits from the company’s back-to-back acquisitions also contributed to earnings growth.
The adjusted earnings exclude $25 million and $72 million of pre-tax charges related to acquisitions and other actions in the fourth quarter of 2016 and 2015, respectively.
Revenues and Operating Profits
Quarterly revenues inched up 3% to $1.47 billion backed by higher sales in Innerwear and Activewear categories and contributions from the Knights Apparel business. On a constant currency basis and excluding the effects of acquisitions and exit of a retailer in Canada, sales were up 2%. Revenues missed Zacks Consensus Estimate by 3.92% during the quarter.
Gross profit declined 1.9% to $557.3 million backed by higher cost of sales. Gross margin, however, expanded 50 basis points (bps) to 37.8% due to lower cost of sales. Adjusted operating profit slipped 7.3% to $245.6 million due to higher selling, general and administrative expenses. Operating margin contracted 70 bps to 16.7%.
Segment Details
Following the changes made at managerial level, the company shifted its wholesale e-commerce business from the Direct-to-Consumer segment to the respective Innerwear and Activewear segments in the first quarter of 2016.
Innerwear: Sales slipped 4.7% year over year to $749.22 million due to lower sales at the mass channels. Operating profits declined 10.2% due to higher operating expenses.
Activewear: Sales were down 3.6% from the year-ago quarter to $367.39 million due to lower sales at the Hanes Activewear business as well as sporting goods, mid-tier and department store channels, which were impacted by bankruptcies and a tough year-over-year comparison. Operating profits slipped 7% on higher administrative expenses.
International: Sales went up almost 2% on a constant currency basis to $269.66 million owing to higher sales in Europe and Asia. Operating profit jumped 14%, while operating margins expanded 90 bps.
Direct to Consumer: Sales decreased 3.7% to $86.45 million and operating income plunged 6.3% to $8.3 billion.
2016 Guidance
In May 2016, Hanesbrands raised its full-year earnings and sales guidance based on expectations of increased synergies from the Champion Europe and Pacific Brands acquisitions and debt refinancing. The company maintained its full-year guidance during the second-quarter earnings conference call.
For 2016, Hanesbrands expects adjusted earnings in the range of $1.89–$1.95 per share. The company anticipates sales between $6.15 billion and $6.25 billion. Hanesbrands expects operating profit in the range of $940 million to $975 million. Apart from synergies from buyouts, the guidance reflects contributions from debt refinancing and the tax-rate effect of the new FASB Accounting Standards Update related to accounting for stock compensation.
Hanesbrands has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader consumer discretionary sector include Apollo Group Inc. , Pool Corporation (POOL - Free Report) and Wynn Resorts Limited (WYNN - Free Report) . All these stocks hold a Zacks Rank #2 (Buy).
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Hanesbrands Inc.’s (HBI - Free Report) second-quarter 2016 earnings per share of 51 cents missed the Zacks Consensus Estimate of 52 cents by 1.92%. Earnings, however, improved 2% year over year on higher sales due to the Innovate-to-Elevate strategy.
The strategy focuses on value-added, high-priced and higher-margin items that can be supplied at lower costs. Benefits from the company’s back-to-back acquisitions also contributed to earnings growth.
The adjusted earnings exclude $25 million and $72 million of pre-tax charges related to acquisitions and other actions in the fourth quarter of 2016 and 2015, respectively.
Revenues and Operating Profits
Quarterly revenues inched up 3% to $1.47 billion backed by higher sales in Innerwear and Activewear categories and contributions from the Knights Apparel business. On a constant currency basis and excluding the effects of acquisitions and exit of a retailer in Canada, sales were up 2%. Revenues missed Zacks Consensus Estimate by 3.92% during the quarter.
Gross profit declined 1.9% to $557.3 million backed by higher cost of sales. Gross margin, however, expanded 50 basis points (bps) to 37.8% due to lower cost of sales. Adjusted operating profit slipped 7.3% to $245.6 million due to higher selling, general and administrative expenses. Operating margin contracted 70 bps to 16.7%.
Segment Details
Following the changes made at managerial level, the company shifted its wholesale e-commerce business from the Direct-to-Consumer segment to the respective Innerwear and Activewear segments in the first quarter of 2016.
Innerwear: Sales slipped 4.7% year over year to $749.22 million due to lower sales at the mass channels. Operating profits declined 10.2% due to higher operating expenses.
Activewear: Sales were down 3.6% from the year-ago quarter to $367.39 million due to lower sales at the Hanes Activewear business as well as sporting goods, mid-tier and department store channels, which were impacted by bankruptcies and a tough year-over-year comparison. Operating profits slipped 7% on higher administrative expenses.
International: Sales went up almost 2% on a constant currency basis to $269.66 million owing to higher sales in Europe and Asia. Operating profit jumped 14%, while operating margins expanded 90 bps.
Direct to Consumer: Sales decreased 3.7% to $86.45 million and operating income plunged 6.3% to $8.3 billion.
2016 Guidance
In May 2016, Hanesbrands raised its full-year earnings and sales guidance based on expectations of increased synergies from the Champion Europe and Pacific Brands acquisitions and debt refinancing. The company maintained its full-year guidance during the second-quarter earnings conference call.
For 2016, Hanesbrands expects adjusted earnings in the range of $1.89–$1.95 per share. The company anticipates sales between $6.15 billion and $6.25 billion. Hanesbrands expects operating profit in the range of $940 million to $975 million. Apart from synergies from buyouts, the guidance reflects contributions from debt refinancing and the tax-rate effect of the new FASB Accounting Standards Update related to accounting for stock compensation.
Hanesbrands has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader consumer discretionary sector include Apollo Group Inc. , Pool Corporation (POOL - Free Report) and Wynn Resorts Limited (WYNN - Free Report) . All these stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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