HanesBrands posts 38 percent rise in Q2 diluted EPS

HanesBrands net sales for the second quarter of 1.65 billion dollars increased 12 percent, primarily from acquisition contributions. The company said, organic sales trends improved sequentially for the second consecutive quarter, and the company continues to expect organic sales to turn positive and contribute to growth in the second half. On a GAAP basis, second-quarter operating profit of 229 million dollars increased 3 percent and diluted EPS of 0.47 dollar increased 38 percent.

“We continued our strong start to 2017 in the second quarter, consistent with our guidance,” said Hanes Chief Executive Officer Gerald W. Evans Jr. in a media release, adding: “Organic sales trends continued to improve sequentially, acquisitions are contributing value as expected, and our cash-flow efforts, including disciplined inventory management, are generating strong results.”

Acquisitions boost sales growth at HanesBrands

The company said, acquisitions completed in 2016, primarily Champion Europe and Hanes Australasia, contributed approximately 220 million dollars in net sales in the second quarter. Organic sales decreased 3 percent, primarily as a result of the expected lower sales in innerwear and domestic manage-for-cash businesses as well as an unexpected timing shift of sports apparel sales to the third quarter. However, organic sales trends continued to improve from previous sequential quarters in which organic sales decreased 4 percent in the first quarter of 2017 and 5 percent in the fourth quarter of 2016. Positive organic growth is expected in the third and fourth quarters of 2017.

Second-quarter sales in the online channel globally increased approximately 25 percent and represented approximately 9 percent of total sales. Global Champion sales increased 7 percent in the second quarter on a pro forma basis.

Hanes said, it continues to execute its multiyear ‘Project Booster’ program to generate investment for sales growth, reduce costs and increase cash flow. As expected, the company incurred Project Booster-related expense in the second quarter of approximately 8 million dollars, including funding an employee separation program. By the end of 2019, Project Booster is expected to generate approximately 150 million dollars in annualized cost savings, with annualized reinvestment of approximately 50 million dollars of the savings for targeted growth opportunities.

When excluding pretax acquisition-related and integration charges, the company’s adjusted operating profit of 255 million dollars and adjusted EPS of 0.53 dollar each increased 4 percent.

Sales performance of Hanes business segments

Year-over-year segment sales decreased less than 3 percent in the second quarter, compared with lower sales of 6 percent in the first quarter 2017 and 8 percent in the fourth quarter 2016. There was sequential improvement for both the basics and intimates businesses. Operating profit declined 8 percent as a result of lower sales and Project Booster expenses.

Activewear sales increased 1 percent. Acquisition benefits and sales growth for Hanes retail and the online channel were partially offset by the later-than-expected licensed sports apparel shipments and the effect of retailer bankruptcies. Operating profit decreased 10 percent, primarily as a result of the impact of retailer bankruptcies and Project Booster expense.

Second-quarter segment sales increased 76 percent as a result of acquisitions and strong results in Asia, while operating profit increased 152 percent, benefiting from European acquisition synergies.

Hanes reaffirms 2017 financial guidance

Hanes has reaffirmed its full-year guidance for 2017 and issued third-quarter guidance for select performance measures. For 2017, the company expects net sales of 6.45 billion dollars to 6.55 billion dollars, GAAP operating profit of 845 million dollars to 895 million dollars, adjusted operating profit excluding actions of 935 million dollars to 975 million dollars, GAAP EPS for continuing operations of 1.70 dollars to 1.82 dollars, adjusted EPS for continuing operations excluding actions of 1.93 dollars to 2.03 dollars, and record net cash from operations of 625 million to 725 million dollars.

Compared with 2016 results, the midpoint of 2017 guidance represents net sales growth of 8 percent, GAAP operating profit growth of 12 percent, adjusted operating profit growth of 5 percent, GAAP EPS growth from continuing operations of 26 percent, adjusted EPS growth from continuing operations of 7 percent, and operating cash flow growth of 11 percent.

Incremental sales from acquisitions for the year are expected to be approximately 440 million dollars. Full-year organic sales growth is expected to range from flat to up 2 percent, and full-year innerwear segment sales are expected to be comparable to 2016. In the second half, the company expects organic growth in each of the innerwear, activewear and international segments.

The company expects total net sales of approximately 1.80 billion dollars in the third quarter, an increase of approximately 2.5 percent compared with the third quarter 2016. Third-quarter GAAP EPS is expected to be 0.54 dollar to 0.57 dollar, and adjusted EPS is expected to be 0.59 dollar to 0.61 dollar.

Picture:Hanes website