HanesBrands posts 7 percent net sales increase in Q1

HanesBrands, for the quarter ended March 31, 2018, reported net sales growth of 7 percent to 1.47 billion dollars versus a guidance range of 1.42 billion to 1.44 billion dollars. The company said, GAAP diluted earnings per share for continuing operations increased 16 percent to 0.22 dollar compared with guidance of 0.17 to 0.20 dollars, and adjusted EPS excluding actions decreased 10 percent to 0.26 dollar, compared with guidance of 0.23 to 0.25 dollar.

“We are focused on delivering quarterly results consistent with the promises we make in our guidance,” said Hanes Chief Executive Officer Gerald W. Evans Jr. in a media release, adding, “We are reaping ongoing benefits from diversifying our business through geographic expansion, Champion brand growth globally, and increased sales in the online channel.”

Highlights of HanesBrands’ Q1 results

HaneBrands said, the acquisitions of Bras N Things and Alternative Apparel contributed to sales growth in the quarter, while organic sales growth, driven by increased Champion and online sales, more than offset declines in the US brick-and-mortar channel. International operating profit growth, the company added, was offset by declines in domestic operating profit.

Net sales for Bras N Things, acquired in February 2018, and Alternative Apparel, acquired in October 2017, totalled 32 million dollars in the quarter. Organic sales, which exclude sales from acquisitions under a year old, increased 1 percent in constant currency. Global Champion sales increased 22 percent in the quarter and were up 17 percent in constant currency.

Global consumer-directed sales, consisting of company retail and online channel sales, increased 23 percent in the first quarter and represented 21 percent of total sales. Company retail sales, which includes company-owned stores and dedicated brand stores, increased 24 percent, while online channel sales, which includes company websites, traditional retailer websites and pure-play Internet retailers, increased 20 percent, up in every geography.

HanesBrands’ performance across segments

US Innerwear segment sales decreased 3 percent and operating profit decreased 13 percent, affected by raw material inflation and lower volume. Innerwear Basics sales decreased less than 1 percent, with growth in socks and children’s underwear sales offset by declines primarily in women’s underwear. Innerwear Intimates sales decreased 7 percent, affected by soft shapewear sales and retailer door closings within the past year. Bra sales decreased less than 2 percent with improving trends as ongoing improvement initiatives are gaining traction.

US Activewear segment sales increased 6 percent in the quarter, benefitting from the acquisition of Alternative Apparel. Organic sales increased 1 percent despite space constraints in the mass channel. Champion sales increased at a high-single-digit rate. Online channel sales for the segment increased 26 percent in the quarter and represented 10 percent of sales.

Although mix of products sold was favourable, segment operating profit decreased 12 percent due to raw material inflation and short-term higher distribution costs.

International sales rise 19 percent

International sales increased 19 percent and operating profit increased 46 percent, benefitting from foreign currency exchange rates, organic growth, synergies from past acquisitions, and contributions from the mid-quarter acquisition of Bras N Things.

The segment’s operating margin of 13.5 percent increased 250 basis points over the year-ago quarter. International constant-currency organic sales increased 7 percent on strong double-digit Champion sales growth in Europe and Asia. Organic consumer-directed sales, which consist of all online channel sales and company retail stores, increased 22 percent and accounted for 28 percent of total segment sales.

Hanes reiterates 2018 financial guidance

Hanes continues to expect full-year 2018 net sales of 6.72 billion dollars to 6.82 billion dollars, GAAP operating profit of 870 million dollars to 905 million dollars, adjusted operating profit excluding actions of 950 million dollars to 985 million dollars, GAAP EPS of 1.54 dollars to 1.62 dollars, adjusted EPS excluding actions of 1.72 dollars to 1.80 dollars, and net cash from operations of 675 million dollars to 750 million dollars.

With US income tax reform, the company expects the 2018 full-year tax rate to be approximately 16 percent. Key assumptions in the company’s guidance include: a cautious outlook for the US brick-and-mortar consumer environment, including the first-half effect of door closures; an increase in full-year organic sales driven by online, global Champion, and international growth; and higher commodity costs and increased marketing investment to support additional planned product innovation.

Second-quarter net sales, the company said, are expected to be in the range of 1.7 billion dollars to 1.725 billion dollars. At the midpoint of this guidance range, constant-currency organic sales are expected to decline less than 1 percent. GAAP EPS is expected to be 0.38 dollar to 0.40 dollar, and adjusted EPS excluding actions is expected to be 0.44 dollar to 0.46 dollar.

Picture credit:HanesBrands multimedia centre