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Bear of the Day: HanesBrands Inc. (HBI)

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HanesBrands Inc. (HBI - Free Report) is facing an uncertain retail environment. This Zacks Rank #5 (Strong Sell) is expected to see earnings decline by the double digits this year.

HanesBrands is an apparel company with well known brands such as Hanes, Champion and Bonds. It employs 59,000 associates in 33 countries.

Met the Estimate in the Third Quarter

On Nov 9, 2022, HanesBrands reported third quarter earnings and met the Zacks Consensus Estimate of $0.29.

Net sales fell 7% to $1.67 billion, but in constant currency it fell 3%. The constant currency decline was due to the macro-driven slowdown in consumer spending in the U.S. and certain Asian markets, coupled with the impact to orders as U.S. retailers were tightly managing their own inventory levels, which have spiked.

Those headwinds more than offset growth in innerwear in Australia and the Other Americas as well as Champion growth in Europe.

HanesBrands was also committed to reducing its own inventory situation. On a unit basis, inventory rose 16% year-over-year but decreased 6% as compared to the second quarter 2022. It continues to progress on its previously disclosed mitigation initiatives and continues to expect to end 2022 with lower units in inventory as compared to year-end 2021.

Guides 2022 Under Consensus

HanesBrands saw the tough conditions continuing in the fourth quarter of 2022. It gave net sales guidance between $1.4 and $1.45 billion. At the midpoint, that represents an approximately 15% decline compared to the prior year and a 19% decline on a reported basis.

For the full year, it gave earnings guidance between $0.95 and $1.02.

As a result, the analysts have cut their 2022 earnings estimates. 3 have cut in the last 30 days pushing the Zacks Consensus down to $0.97 from $1.15.

That is an earnings decline of 47% from 2021 where the company made $1.83.

3 estimates have also been cut for 2023 in the last month as well. The 2023 Zacks Consensus Estimate has fallen to $1.01 from $1.29.

Shares Plunge in 2022

Did you think it was only technology stocks that have plunged in 2022?

HanesBrands shares are down 62% year-to-date and are hitting new 52-week lows. Shares are actually lower than the March 2020 pandemic sell-off.

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Image Source: Zacks Investment Research

They are now dirt-cheap with a forward P/E of 6.5.

It is also shareholder friendly and pays a dividend of $0.60 a year. That is a yield of 8.9%. Is the dividend "safe"?

HanesBrands has paid this $0.60 dividend throughout the pandemic. It did not suspend it as many other companies did. But the only guarantees are death and taxes.

Investors looking for an apparel retailer might want to wait for a turnaround in earnings estimates before jumping in.

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