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Hanesbrands Inc. (HBI - Free Report) is poised to benefit from its growth investments, brand innovation efforts, strong operational execution and focus on cost management. However, high operating costs and expenses, along with a slowdown in consumer spending, remain concerning.
The Zacks Rank #3 (Hold) company has a market capitalization of $1.7 billion and belongs to the Zacks Textile - Apparel industry.
Factors Favoring Hanesbrands
The company has been gaining from its Full Potential plan, unveiled in May 2021, which involves growing its global Champion brand, reigniting innerwear growth, driving consumer-centricity and focusing on its portfolio. Management remains focused on investing in the Champion brand as it sees significant growth opportunities in the women’s and kids’ businesses. The expansion into new markets like China and the deepening of adjacent product categories, including footwear, bode well.
Hanesbrands’ efforts to bolster brands via robust innovations have been enabling it to gain new customers in the market. The company launched Hanes Originals, which is a line of innovative products aimed at younger customers.
HBI’s investment in innerwear brands and e-commerce capabilities have been allowing it to deliver an enhanced consumer experience, in turn driving growth with retail partners and online channels.
Also, the company remains focused on streamlining its portfolio by shedding non-core and lower-margin businesses to enhance its operations. Management is also investing in data analytics and supply chain improvements to fuel growth. The company’s cost-saving efforts are also likely to enable it to protect its margins and profitability amid a high inflationary environment.
To increase its financial flexibility, HBI eliminated quarterly cash dividends, which is likely to increase its free cash flow and help pay down debt. It’s worth noting that the company refinanced its 2024 maturities in the first quarter of 2023.
Image Source: Zacks Investment Research
The company’s shares have lost 1.8% in the past three months compared with the industry’s 2.9% decline.
Factors Affecting the Company
Hanesbrands has been grappling with soft demand for its products owing to the inflationary environment. For instance, in the first quarter, its net sales declined 11.8% to $1,389.4 million. On a constant-currency basis, net sales fell by 10%. The downside was caused by a macro-driven slowdown in consumer spending across the United States and Australia.
For the second quarter of 2023, the company anticipates generating net sales of $1.42-$1.47 billion, indicating a 3% decline year over year on a constant currency basis and a 5% decline on a reported basis.
Hanesbrands has been subject to the impacts of commodity and ocean freight inflation, coupled with an adverse product mix and increased labor rates. In the first quarter, its adjusted gross profit margin declined 440 basis points (bps) year-over-year to 32.7%. The gross profit margin in second-quarter 2023 is expected to contract by around 400 bps year-over-year, reflecting headwinds from freight and commodity inflation.
G-III Apparel is a leading designer and distributor of women's and men's apparel in the United States. The Zacks Consensus Estimate for G-III Apparel’s current financial-year sales suggests growth of 1.9%. Its earnings per share are expected to rise 0.4% from the corresponding year-ago reported figure. GIII has a trailing four-quarter earnings surprise of 47.4%, on average.
Guess specializes in designing and retailing lifestyle collections of apparel and accessories. The Zacks Consensus Estimate for Guess’ current financial-year sales and earnings per share suggests growth of 2.8% and 2.6%, respectively, from the corresponding year-ago reported figures. GES has a trailing four-quarter earnings surprise of 21%, on average.
Lululemon Athletica is a retailer of athletic apparel, footwear and accessories for women and men. The Zacks Consensus Estimate for LULU’s current financial-year sales and earnings per share suggests growth of 17.1% and 18.4%, respectively, from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 9.9%, on average.
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Hanesbrands (HBI) Exhibits Bright Prospects, Headwinds Persist
Hanesbrands Inc. (HBI - Free Report) is poised to benefit from its growth investments, brand innovation efforts, strong operational execution and focus on cost management. However, high operating costs and expenses, along with a slowdown in consumer spending, remain concerning.
The Zacks Rank #3 (Hold) company has a market capitalization of $1.7 billion and belongs to the Zacks Textile - Apparel industry.
Factors Favoring Hanesbrands
The company has been gaining from its Full Potential plan, unveiled in May 2021, which involves growing its global Champion brand, reigniting innerwear growth, driving consumer-centricity and focusing on its portfolio. Management remains focused on investing in the Champion brand as it sees significant growth opportunities in the women’s and kids’ businesses. The expansion into new markets like China and the deepening of adjacent product categories, including footwear, bode well.
Hanesbrands’ efforts to bolster brands via robust innovations have been enabling it to gain new customers in the market. The company launched Hanes Originals, which is a line of innovative products aimed at younger customers.
HBI’s investment in innerwear brands and e-commerce capabilities have been allowing it to deliver an enhanced consumer experience, in turn driving growth with retail partners and online channels.
Also, the company remains focused on streamlining its portfolio by shedding non-core and lower-margin businesses to enhance its operations. Management is also investing in data analytics and supply chain improvements to fuel growth. The company’s cost-saving efforts are also likely to enable it to protect its margins and profitability amid a high inflationary environment.
To increase its financial flexibility, HBI eliminated quarterly cash dividends, which is likely to increase its free cash flow and help pay down debt. It’s worth noting that the company refinanced its 2024 maturities in the first quarter of 2023.
Image Source: Zacks Investment Research
The company’s shares have lost 1.8% in the past three months compared with the industry’s 2.9% decline.
Factors Affecting the Company
Hanesbrands has been grappling with soft demand for its products owing to the inflationary environment. For instance, in the first quarter, its net sales declined 11.8% to $1,389.4 million. On a constant-currency basis, net sales fell by 10%. The downside was caused by a macro-driven slowdown in consumer spending across the United States and Australia.
For the second quarter of 2023, the company anticipates generating net sales of $1.42-$1.47 billion, indicating a 3% decline year over year on a constant currency basis and a 5% decline on a reported basis.
Hanesbrands has been subject to the impacts of commodity and ocean freight inflation, coupled with an adverse product mix and increased labor rates. In the first quarter, its adjusted gross profit margin declined 440 basis points (bps) year-over-year to 32.7%. The gross profit margin in second-quarter 2023 is expected to contract by around 400 bps year-over-year, reflecting headwinds from freight and commodity inflation.
Key Picks
Some better-ranked stocks are G-III Apparel Group, Ltd. (GIII - Free Report) , Guess, Inc. (GES - Free Report) and Lululemon Athletica, Inc. (LULU - Free Report) . While G-III Apparel sports a Zacks Rank #1 (Strong Buy), Guess and Lululemon Athletica each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
G-III Apparel is a leading designer and distributor of women's and men's apparel in the United States. The Zacks Consensus Estimate for G-III Apparel’s current financial-year sales suggests growth of 1.9%. Its earnings per share are expected to rise 0.4% from the corresponding year-ago reported figure. GIII has a trailing four-quarter earnings surprise of 47.4%, on average.
Guess specializes in designing and retailing lifestyle collections of apparel and accessories. The Zacks Consensus Estimate for Guess’ current financial-year sales and earnings per share suggests growth of 2.8% and 2.6%, respectively, from the corresponding year-ago reported figures. GES has a trailing four-quarter earnings surprise of 21%, on average.
Lululemon Athletica is a retailer of athletic apparel, footwear and accessories for women and men. The Zacks Consensus Estimate for LULU’s current financial-year sales and earnings per share suggests growth of 17.1% and 18.4%, respectively, from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 9.9%, on average.