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Bear of the Day: Hanesbrands (HBI)

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Hanesbrands Inc. (HBI - Free Report) designs, manufactures, and sells apparel essentials for men, women, and kids in the U.S. and internationally. Its brand portfolio is well-established, and includes Hanes, Champion, Playtex, Bali, Just My Size, Wonderbra, and Barely There.

Q1 Results Show Coronavirus Impact

Both earnings and revenue fell short of the analyst consensus estimate; total sales plunged 17% year-over-year.

Outerwear sales dropped 10.2% and innerware sales declined 9.4%.

Management did offer some concrete estimates of the financial impact from the coronavirus. The company believes that earnings would have been 20 cents higher if it wasn’t for the pandemic; it also lost $181 million in revenue.

"We were on a pace to deliver a strong first quarter above our expectations until the late quarter impact of the COVID-19 pandemic," CEO Gerald Evans Jr. said.

But, operating cash flow actually improved by $100 million in Q1. The company only burned through $84 million in Q1 2020 compared to $194 million in Q1 2019.

Bottom Line

HBI is now a Zacks Rank #5 (Strong Sell). Six analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 74 cents from $1.34 to $0.60 a share; earnings are expected to decline almost 66% for the fiscal year.

For nearly all economic sectors, the real damage from the coronavirus is still unclear.

But Hanesbrands has been able to stave off greater losses by switching and making face masks and other protective medical garments.

"We believe our mask and protective garment business could be a sizable revenue opportunity with growth potential over the next several years," he said. The company expects its medical garment business will generate $300 million in sales.

This new business segment could be just the thing to help HBI get through these current shaky economic times.

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