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Will Hanesbrands' Online Business & Cost Savings Aid Growth?
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Like other apparel companies, Hanesbrands Inc. (HBI - Free Report) had to temporarily shut stores in the wake of the coronavirus outbreak. The company closed nearly 1,200 brand stores across the United States, Europe and Australia, temporarily owing to the pandemic. This primarily affected its first-quarter 2020 performance, wherein both top and bottom lines deteriorated year over year and fell short of the Zacks Consensus Estimate.
Nevertheless, Hanesbrands has been producing cloth face coverings and medical gowns for the U.S. government amid the pandemic. The company is also speeding up the launch of a cotton face mask business for consumers and expects to create a product line of basic personal protective garments. Incidentally, management expects revenues from this business to cross $300 million in 2020.
Also, the company has undertaken actions like preserving cash and strengthening liquidity to deal with the crisis. In this regard, management has been curbing discretionary and capital spends, managing inventories as well as temporarily cutting salaries and furloughing certain employee groups. Such temporary pay cuts, furloughs and lower discretionary spending on media and marketing are likely to save nearly $200 million in 2020. Incidentally, shares of Hanesbrands have rallied 28.4% in the past three months compared with the industry’s growth of 27.5%.
What’s Hurting Hanesbrands’ Performance?
The outbreak of the novel coronavirus hurt Hanesbrands’ performance in first-quarter 2020. The company posted adjusted earnings of 5 cents, down from earnings of 27 cents in the year-ago quarter. Moreover, net sales fell 11.9% year over year. Further, adjusted operating profit plunged 57.8% in the first quarter. Management stated that the late-quarter pandemic impacts hurt revenues by nearly $181 million, operating profit by $86 million and earnings per share by nearly 20 cents.
Moreover, the company is exposed to unfavorable foreign currency translations, as a considerable portion of total sales come from international businesses. Management expects foreign currency translation to hurt sales and operating profit in 2020. Also, sluggishness in the company’s Innerwear segment cannot be ignored. Notably, sales in the segment fell 9.4% year over year in the first quarter mainly due to the exit of C9 Champion mass retail program and the adverse impact of the pandemic.
The Brighter Side
As consumers are increasingly resorting to online shopping, this Zacks Rank #3 (Hold) company is focused on developing its online sales. In the first quarter of 2020, the company’s total online sales increased 5% globally. Impressively, growth rates at online channels accelerated in the past two weeks of the quarter, which continued in April. Hanesbrands, which is global partner with Amazon (AMZN - Free Report) , is focused on making incremental investments in its online business to keep pace with consumers’ evolving shopping patterns especially as the coronavirus pandemic increases digital shopping penetration.
Apart from this, Hanesbrands launched a multiyear program in first-quarter 2017 to drive investment for growth, minimize costs as well as increase cash flow. This program, which is well-positioned for the next five years, aims to boost the company’s Sell More, Spend Less, Generate Cash strategy for additional gains, mainly from the global commercial and supply chain scale through acquisitions. Furthermore, the Project Booster cost savings along with other cash flow drivers like synergies from buyouts and diversified revenues bode well.
Crocs (CROX - Free Report) , with a Zacks Rank #2, has long-term earnings growth rate of 15%.
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Will Hanesbrands' Online Business & Cost Savings Aid Growth?
Like other apparel companies, Hanesbrands Inc. (HBI - Free Report) had to temporarily shut stores in the wake of the coronavirus outbreak. The company closed nearly 1,200 brand stores across the United States, Europe and Australia, temporarily owing to the pandemic. This primarily affected its first-quarter 2020 performance, wherein both top and bottom lines deteriorated year over year and fell short of the Zacks Consensus Estimate.
Nevertheless, Hanesbrands has been producing cloth face coverings and medical gowns for the U.S. government amid the pandemic. The company is also speeding up the launch of a cotton face mask business for consumers and expects to create a product line of basic personal protective garments. Incidentally, management expects revenues from this business to cross $300 million in 2020.
Also, the company has undertaken actions like preserving cash and strengthening liquidity to deal with the crisis. In this regard, management has been curbing discretionary and capital spends, managing inventories as well as temporarily cutting salaries and furloughing certain employee groups. Such temporary pay cuts, furloughs and lower discretionary spending on media and marketing are likely to save nearly $200 million in 2020. Incidentally, shares of Hanesbrands have rallied 28.4% in the past three months compared with the industry’s growth of 27.5%.
What’s Hurting Hanesbrands’ Performance?
The outbreak of the novel coronavirus hurt Hanesbrands’ performance in first-quarter 2020. The company posted adjusted earnings of 5 cents, down from earnings of 27 cents in the year-ago quarter. Moreover, net sales fell 11.9% year over year. Further, adjusted operating profit plunged 57.8% in the first quarter. Management stated that the late-quarter pandemic impacts hurt revenues by nearly $181 million, operating profit by $86 million and earnings per share by nearly 20 cents.
Moreover, the company is exposed to unfavorable foreign currency translations, as a considerable portion of total sales come from international businesses. Management expects foreign currency translation to hurt sales and operating profit in 2020. Also, sluggishness in the company’s Innerwear segment cannot be ignored. Notably, sales in the segment fell 9.4% year over year in the first quarter mainly due to the exit of C9 Champion mass retail program and the adverse impact of the pandemic.
The Brighter Side
As consumers are increasingly resorting to online shopping, this Zacks Rank #3 (Hold) company is focused on developing its online sales. In the first quarter of 2020, the company’s total online sales increased 5% globally. Impressively, growth rates at online channels accelerated in the past two weeks of the quarter, which continued in April. Hanesbrands, which is global partner with Amazon (AMZN - Free Report) , is focused on making incremental investments in its online business to keep pace with consumers’ evolving shopping patterns especially as the coronavirus pandemic increases digital shopping penetration.
Apart from this, Hanesbrands launched a multiyear program in first-quarter 2017 to drive investment for growth, minimize costs as well as increase cash flow. This program, which is well-positioned for the next five years, aims to boost the company’s Sell More, Spend Less, Generate Cash strategy for additional gains, mainly from the global commercial and supply chain scale through acquisitions. Furthermore, the Project Booster cost savings along with other cash flow drivers like synergies from buyouts and diversified revenues bode well.
Top 2 Consumer Discretionary Picks
Activision Blizzard , which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 18.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Crocs (CROX - Free Report) , with a Zacks Rank #2, has long-term earnings growth rate of 15%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>