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Hanesbrands (HBI) Q4 Earnings Lag Estimates, Sales Decline Y/Y
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Hanesbrands Inc. (HBI - Free Report) reported weaker-than-expected fourth-quarter 2023 results, with the bottom and the top line missing the Zacks Consensus Estimate. Both metrics declined year over year. More-than-expected challenges in the sales environment hurt results. Sales declined across all segments in the quarter.
Q4 in Detail
The company posted adjusted earnings from continuing operations of 3 cents per share, missing the Zacks Consensus Estimate of 9 cents. The metric declined from 7 cents per share reported in the year-ago quarter.
Net sales from continuing operations declined 12% to $1,296.8 million and came below the Zacks Consensus Estimate of $1,361.7 million. The metric includes nearly 130 basis points (bps) impact from the U.S. Hosiery divestiture and almost 40 bps from unfavorable currency rates. On a constant-currency basis, organic net sales fell nearly 10% on more-than-expected global consumer environment challenges, mainly in the U.S. activewear market and in Australia.
Global Champion brand sales tumbled 23%, with a decline of 30% in the United States and 14% internationally. Global Champion brand sales fell 24% at cc. International brand sales declined 15% on a cc basis compared with the prior-year quarter.
Hanesbrands Inc. Price, Consensus and EPS Surprise
Adjusted gross profit came in at $495.4 million, down from $504.9 million reported in the year-ago quarter. We had expected the metric to come in at $511.6 million. The adjusted gross margin was 38.2%, up nearly 395 basis points (bps), exceeding our anticipation of 37.5%. The upside was driven by benefits from inventory actions, cost-saving initiatives and reduced input costs. Increased wage inflation continued to be a hurdle.
Adjusted SG&A expenses declined 9% to $385 million on cost savings initiatives, disciplined expense management and reduced variable expenses. The metric, as a percentage of net sales, increased 100 bps year over year to 29.7% due to reduced sales and increased brand marketing investments.
Adjusted operating profit came in at $111 million, up from $83 million in the fourth quarter of 2022. Adjusted operating margin stood at 8.5%, up nearly 295 bps. We had expected adjusted operating profit and margin to be $131 million and 9.6%, respectively.
Segmental Details
Innerwear: The segment’s sales fell 1.2% year over year to $533.6 million. We had expected the segment’s sales to decline by 5.7% during the quarter. The company highlighted that it gained market share in the Men and Women category despite a 5% decline in the market. Consumer-led innovations, permanent retail space gains, higher brand marketing investments and greater on-shelf product availability drove market share gains. The segmental operating margin was 21.1%, up almost 1,280 bps.
Activewear: Sales plunged 24.1% to $285.8 million on tough activewear apparel market dynamics, which include soft consumer demand and cautious ordering from retailers. The company’s strategic brand-related actions continued to affect sales.
International: Revenues in the International business declined 8.6% year over year to $436.9 million. This included nearly $6 million of unfavorable currency headwinds. We had expected the segment’s sales to decline by 9.3% during the quarter. We note that growth in Innerwear across the Americas and Champion in China was more than offset by softness in Australia stemming from a challenging macroeconomic environment and Champion decreases in Europe, Japan and Canada. The segmental operating margin stood at 16.2%, up nearly 200 bps.
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $205.5 million, long-term debt of $3,235.6 million and total stockholders’ equity of $419.4 million. It had roughly $1.1 billion of available capacity under its credit facility at the end of the quarter.
For the quarter, the company provided $274 million in net cash from operating activities. Free cash flow was $266 million in the fourth quarter of 2023.
Image Source: Zacks Investment Research
Guidance
For 2024, net sales from continuing operations are anticipated to be $5.35-$5.47 billion, including anticipated headwinds of almost $50 million from the U.S. Hosiery divestiture and a currency headwind of nearly $35 million. The midpoint of the guidance suggests a nearly 4% year-over-year decline on a reported basis and an approximately 2% decline on an organic basis at cc.
Adjusted operating profit from continuing operations is likely to be $500-$520 million, including a currency headwind expectation of roughly $5 million.
Adjusted earnings per share (EPS) from continuing operations is envisioned to be 42-48 cents. Cash flow from operations is forecast to be nearly $400 million, while capital investments are estimated to be almost $75 million.
For first-quarter 2024, net sales from continuing operations are expected to be $1.13-$1.19 billion, including a projected headwind of nearly $13 million from currency rates. The midpoint of the guidance suggests a nearly 16% year-over-year decline on a reported basis and an approximately 14% decline on an organic basis at cc. Adjusted operating profit from continuing operations is expected to be $60-$80 million. Adjusted loss from continuing operations is envisioned to be 4-10 cents per share.
HBI’s shares have increased 13.2% in the past three months compared with the industry’s 13.5% decline.
Eye These 3 Solid Picks
Here, we have highlighted three better-ranked stocks, namely GIII Apparel Group (GIII - Free Report) , Urban Outfitters, Inc. (URBN - Free Report) and PVH Corporation (PVH - Free Report) .
GIII Apparel, a manufacturer, designer, and distributor of apparel and accessories, sports a Zacks Rank #1 (Strong Buy) at present. The company had an EPS surprise of 33.7% in the third quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current fiscal-year earnings suggests growth of 39.3% from the fiscal 2022 actuals. GIII has a trailing four-quarter earnings surprise of 541.8%, on average.
Urban Outfitters, which specializes in the retail and wholesale of general consumer products, carries a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year sales and earnings suggests growth of 7.5% and 85.7%, respectively, from the fiscal 2022 reported figure. URBN has a trailing four-quarter earnings surprise of 22%, on average.
PVH Corp, a leading lifestyle retailer, currently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for PVH’s current fiscal-year sales and earnings suggests growth of 1.2% and 16.6%, respectively.
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Hanesbrands (HBI) Q4 Earnings Lag Estimates, Sales Decline Y/Y
Hanesbrands Inc. (HBI - Free Report) reported weaker-than-expected fourth-quarter 2023 results, with the bottom and the top line missing the Zacks Consensus Estimate. Both metrics declined year over year. More-than-expected challenges in the sales environment hurt results. Sales declined across all segments in the quarter.
Q4 in Detail
The company posted adjusted earnings from continuing operations of 3 cents per share, missing the Zacks Consensus Estimate of 9 cents. The metric declined from 7 cents per share reported in the year-ago quarter.
Net sales from continuing operations declined 12% to $1,296.8 million and came below the Zacks Consensus Estimate of $1,361.7 million. The metric includes nearly 130 basis points (bps) impact from the U.S. Hosiery divestiture and almost 40 bps from unfavorable currency rates. On a constant-currency basis, organic net sales fell nearly 10% on more-than-expected global consumer environment challenges, mainly in the U.S. activewear market and in Australia.
Global Champion brand sales tumbled 23%, with a decline of 30% in the United States and 14% internationally. Global Champion brand sales fell 24% at cc. International brand sales declined 15% on a cc basis compared with the prior-year quarter.
Hanesbrands Inc. Price, Consensus and EPS Surprise
Hanesbrands Inc. price-consensus-eps-surprise-chart | Hanesbrands Inc. Quote
Adjusted gross profit came in at $495.4 million, down from $504.9 million reported in the year-ago quarter. We had expected the metric to come in at $511.6 million. The adjusted gross margin was 38.2%, up nearly 395 basis points (bps), exceeding our anticipation of 37.5%. The upside was driven by benefits from inventory actions, cost-saving initiatives and reduced input costs. Increased wage inflation continued to be a hurdle.
Adjusted SG&A expenses declined 9% to $385 million on cost savings initiatives, disciplined expense management and reduced variable expenses. The metric, as a percentage of net sales, increased 100 bps year over year to 29.7% due to reduced sales and increased brand marketing investments.
Adjusted operating profit came in at $111 million, up from $83 million in the fourth quarter of 2022. Adjusted operating margin stood at 8.5%, up nearly 295 bps. We had expected adjusted operating profit and margin to be $131 million and 9.6%, respectively.
Segmental Details
Innerwear: The segment’s sales fell 1.2% year over year to $533.6 million. We had expected the segment’s sales to decline by 5.7% during the quarter. The company highlighted that it gained market share in the Men and Women category despite a 5% decline in the market. Consumer-led innovations, permanent retail space gains, higher brand marketing investments and greater on-shelf product availability drove market share gains. The segmental operating margin was 21.1%, up almost 1,280 bps.
Activewear: Sales plunged 24.1% to $285.8 million on tough activewear apparel market dynamics, which include soft consumer demand and cautious ordering from retailers. The company’s strategic brand-related actions continued to affect sales.
International: Revenues in the International business declined 8.6% year over year to $436.9 million. This included nearly $6 million of unfavorable currency headwinds. We had expected the segment’s sales to decline by 9.3% during the quarter. We note that growth in Innerwear across the Americas and Champion in China was more than offset by softness in Australia stemming from a challenging macroeconomic environment and Champion decreases in Europe, Japan and Canada. The segmental operating margin stood at 16.2%, up nearly 200 bps.
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $205.5 million, long-term debt of $3,235.6 million and total stockholders’ equity of $419.4 million. It had roughly $1.1 billion of available capacity under its credit facility at the end of the quarter.
For the quarter, the company provided $274 million in net cash from operating activities. Free cash flow was $266 million in the fourth quarter of 2023.
Image Source: Zacks Investment Research
Guidance
For 2024, net sales from continuing operations are anticipated to be $5.35-$5.47 billion, including anticipated headwinds of almost $50 million from the U.S. Hosiery divestiture and a currency headwind of nearly $35 million. The midpoint of the guidance suggests a nearly 4% year-over-year decline on a reported basis and an approximately 2% decline on an organic basis at cc.
Adjusted operating profit from continuing operations is likely to be $500-$520 million, including a currency headwind expectation of roughly $5 million.
Adjusted earnings per share (EPS) from continuing operations is envisioned to be 42-48 cents. Cash flow from operations is forecast to be nearly $400 million, while capital investments are estimated to be almost $75 million.
For first-quarter 2024, net sales from continuing operations are expected to be $1.13-$1.19 billion, including a projected headwind of nearly $13 million from currency rates. The midpoint of the guidance suggests a nearly 16% year-over-year decline on a reported basis and an approximately 14% decline on an organic basis at cc. Adjusted operating profit from continuing operations is expected to be $60-$80 million. Adjusted loss from continuing operations is envisioned to be 4-10 cents per share.
HBI’s shares have increased 13.2% in the past three months compared with the industry’s 13.5% decline.
Eye These 3 Solid Picks
Here, we have highlighted three better-ranked stocks, namely GIII Apparel Group (GIII - Free Report) , Urban Outfitters, Inc. (URBN - Free Report) and PVH Corporation (PVH - Free Report) .
GIII Apparel, a manufacturer, designer, and distributor of apparel and accessories, sports a Zacks Rank #1 (Strong Buy) at present. The company had an EPS surprise of 33.7% in the third quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current fiscal-year earnings suggests growth of 39.3% from the fiscal 2022 actuals. GIII has a trailing four-quarter earnings surprise of 541.8%, on average.
Urban Outfitters, which specializes in the retail and wholesale of general consumer products, carries a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year sales and earnings suggests growth of 7.5% and 85.7%, respectively, from the fiscal 2022 reported figure. URBN has a trailing four-quarter earnings surprise of 22%, on average.
PVH Corp, a leading lifestyle retailer, currently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for PVH’s current fiscal-year sales and earnings suggests growth of 1.2% and 16.6%, respectively.