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Hanesbrands (HBI) Posts In-Line Earnings & Sales in Q3
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Hanesbrands Inc.’s (HBI - Free Report) third-quarter 2016 earnings per share of 56 cents came in line with the Zacks Consensus Estimate. However, reported earnings surged 12% year over year on higher sales due to the Innovate-to-Elevate strategy.
This strategy focuses on value-added, high-priced and higher-margin items that can be supplied at lower costs. Additionally, benefits from the company’s back-to-back acquisitions contributed to earnings growth.
The adjusted earnings exclude $43 million of pre-tax charges related to acquisitions and other actions in both third-quarter 2016 and comparable year-ago quarter.
Quarterly revenues increased 11% to $1.76 billion backed by higher sales in core organic Innerwear growth and strong acquisition-related International growth. Revenues matched the Zacks Consensus Estimate during the quarter.
Although cost of sales increased, Hanesbrands' gross profit improved 11.8% to $649.4 million driven by higher sales. Gross margin expanded 40 basis points (bps) to 36.9%. Operating profit increased 9.6% to $228.4 million. Operating margins increased 30 bps year over year backed by synergies from Hanes Europe, Knights Apparel and Maidenform.
Segment Details
Following the changes made at the managerial level, the company shifted its wholesale ecommerce business from the Direct-to-Consumer segment to the respective Innerwear and Activewear segments in first-quarter 2016.
Innerwear: Sales inched up 2% year over year to $688.3 million on the back of 9% gain in sales of basics and 20% gain in men’s underwear. Operating profits benefitted 6.3% due to lower operating expenses.
Activewear: Sales were down 2.1% from the year-ago quarter to $510.6 million due to lower sales of Champion brands products in the sports specialty channel, which was impacted by bankruptcies of several sporting goods retailers in the U.S. Operating profits tanked 22.3% due to short-term dilution from recent acquisitions.
International: Sales surged almost 59.2% to $478.12 million driven by the acquisitions of the Pacific Brands of Australia, Champion Europe and Champion Japan brands. Operating profit soared 79.3%, while operating margins expanded 90 bps owing to strength in Europe, Latin America and Asia.
Direct to Consumer: Sales slumped 11% to $84.0 million due to its transition to a growth-oriented brand. Operating income dropped 6.3% to $8.3 billion.
2016 Guidance
Hanesbrands narrowed its full-year earnings and sales guidance based on year-to-date results.
For 2016, Hanesbrands anticipates adjusted earnings in the range of $1.89–$1.92 per share compared to $1.89–$1.95 expected previously. The company expects sales between $6.15 billion and $6.18 billion compared to $6.15 billion and $6.25 billion projected earlier. Hanesbrands expects operating profit in the range of $940 million to $955 million compared to the range of $940 million to $975 million expected previously.
Fourth-Quarter Outlook
For the fourth quarter, Hanesbrands expects net sales of $1.7 billion to $1.73 billion. Adjusted earnings per share are estimated in the range of 57 cents to 60 cents. Operating profit is expected to be in the range of $276 million to $291 million.
Zacks Rank
Hanesbrands has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader consumer discretionary sector include Duluth Holdings Inc. (DLTH - Free Report) , Michael Kors Holdings Limited and Tailored Brands Inc. . All these stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here
Duluth Holdings has a long-term expected earnings growth rate of 25%. Michael Kors has a long-term growth rate of 10.4%, while Tailored Brands has a long-term growth rate of 17.5%.
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Hanesbrands (HBI) Posts In-Line Earnings & Sales in Q3
Hanesbrands Inc.’s (HBI - Free Report) third-quarter 2016 earnings per share of 56 cents came in line with the Zacks Consensus Estimate. However, reported earnings surged 12% year over year on higher sales due to the Innovate-to-Elevate strategy.
This strategy focuses on value-added, high-priced and higher-margin items that can be supplied at lower costs. Additionally, benefits from the company’s back-to-back acquisitions contributed to earnings growth.
The adjusted earnings exclude $43 million of pre-tax charges related to acquisitions and other actions in both third-quarter 2016 and comparable year-ago quarter.
HANESBRANDS INC Price, Consensus and EPS Surprise
HANESBRANDS INC Price, Consensus and EPS Surprise | HANESBRANDS INC Quote
Revenues and Operating Profits
Quarterly revenues increased 11% to $1.76 billion backed by higher sales in core organic Innerwear growth and strong acquisition-related International growth. Revenues matched the Zacks Consensus Estimate during the quarter.
Although cost of sales increased, Hanesbrands' gross profit improved 11.8% to $649.4 million driven by higher sales. Gross margin expanded 40 basis points (bps) to 36.9%. Operating profit increased 9.6% to $228.4 million. Operating margins increased 30 bps year over year backed by synergies from Hanes Europe, Knights Apparel and Maidenform.
Segment Details
Following the changes made at the managerial level, the company shifted its wholesale ecommerce business from the Direct-to-Consumer segment to the respective Innerwear and Activewear segments in first-quarter 2016.
Innerwear: Sales inched up 2% year over year to $688.3 million on the back of 9% gain in sales of basics and 20% gain in men’s underwear. Operating profits benefitted 6.3% due to lower operating expenses.
Activewear: Sales were down 2.1% from the year-ago quarter to $510.6 million due to lower sales of Champion brands products in the sports specialty channel, which was impacted by bankruptcies of several sporting goods retailers in the U.S. Operating profits tanked 22.3% due to short-term dilution from recent acquisitions.
International: Sales surged almost 59.2% to $478.12 million driven by the acquisitions of the Pacific Brands of Australia, Champion Europe and Champion Japan brands. Operating profit soared 79.3%, while operating margins expanded 90 bps owing to strength in Europe, Latin America and Asia.
Direct to Consumer: Sales slumped 11% to $84.0 million due to its transition to a growth-oriented brand. Operating income dropped 6.3% to $8.3 billion.
2016 Guidance
Hanesbrands narrowed its full-year earnings and sales guidance based on year-to-date results.
For 2016, Hanesbrands anticipates adjusted earnings in the range of $1.89–$1.92 per share compared to $1.89–$1.95 expected previously. The company expects sales between $6.15 billion and $6.18 billion compared to $6.15 billion and $6.25 billion projected earlier. Hanesbrands expects operating profit in the range of $940 million to $955 million compared to the range of $940 million to $975 million expected previously.
Fourth-Quarter Outlook
For the fourth quarter, Hanesbrands expects net sales of $1.7 billion to $1.73 billion. Adjusted earnings per share are estimated in the range of 57 cents to 60 cents. Operating profit is expected to be in the range of $276 million to $291 million.
Zacks Rank
Hanesbrands has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader consumer discretionary sector include Duluth Holdings Inc. (DLTH - Free Report) , Michael Kors Holdings Limited and Tailored Brands Inc. . All these stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here
Duluth Holdings has a long-term expected earnings growth rate of 25%. Michael Kors has a long-term growth rate of 10.4%, while Tailored Brands has a long-term growth rate of 17.5%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>