HanesBrands earnings improve 13 percent in Q3

HanesBrands third quarter net sales increased 11 percent to 1.76 billion dollars, driven by core organic innerwear growth and strong acquisition-related international growth. That growth was partially offset by declines in the activewear and direct to consumer segments. On a GAAP basis, operating profit of 228 million dollars increased 10 percent and earnings per diluted share for continuing operations of 0.45 dollar increased 13 percent.

“As forecasted, we delivered strong growth in the third quarter, and we are generating record cash flow,” said Hanes Chief Executive Officer Gerald W. Evans Jr, adding, “Our sales initiatives have re-accelerated organic growth in several core categories, including 2 percent growth in the quarter for the innerwear segment. Our acquisitions, both past and present, are performing extremely well.”

Key highlights of the third quarter results

When excluding pretax charges, adjusted operating profit of 271 million dollars increased 8 percent, and adjusted EPS for continuing operations of 0.56 dollar increased 12 percent.

Innerwear sales increased 2 percent, driven by high-single-digit growth combined for men’s, women’s and children’s underwear. Segment operating profit increased 6 percent, and the operating profit margin increased 90 basis points to 22 percent.

Acquisitions of Pacific Brands of Australia, Champion Europe and Champion Japan, as well as organic growth in Asia, drove 59 percent growth in international sales. Acquisitions contributed approximately 180 million dollars in sales in the quarter. Operating profit growth of 79 percent was driven by widespread strength in Europe, Latin America and Asia, as well as acquisitions. The segment operating profit margin increased 140 basis points to 12.8 percent.

Activewear segment sales, however, decreased 2 percent as a result of bankruptcies of certain sporting goods retailers. Champion at mass, Hanes Activewear, and college bookstore sports apparel all increased sales. Total segment operating profit decreased 22 percent, affected by lower volume and the mix of products sold.

The direct to consumer segment had an 11 percent decrease in sales and a 52 percent decrease in operating profit. Results were affected by the segment’s exit from its legacy catalog business and noncore offerings to a more focused branded-product store and internet strategy.

Hanes narrows full year financial guidance

Hanes has narrowed its 2016 full-year guidance. The company expects net sales of 6.15 billion dollars to 6.18 billion dollars, GAAP operating profit of 807 million dollars to 822 million dollars, adjusted operating profit excluding actions of 940 million dollars to 955 million dollars, GAAP EPS for continuing operations of 1.45 dollars to 1.49 dollars, adjusted EPS excluding actions for continuing operations of 1.89 dollars to 1.92 dollars, and record net cash from operations of 750 million dollars to 800 million dollars.

The updated guidance compares with previous guidance for net sales of 6.15 billion dollars to 6.25 billion dollars, GAAP operating profit of 760 million dollars to 795 million dollars, adjusted operating profit of 940 million dollars to 975 million dollars, GAAP EPS for continuing operations of 1.44 dollars to 1.54 dollars, adjusted EPS for continuing operations of 1.89 dollars to 1.95 dollars, and net cash from operations of 750 million dollars to 850 million dollars.

The midpoint of the updated guidance represents growth over 2015 of 8 percent for net sales; 37 percent for GAAP operating profit; 10 percent for adjusted operating profit; 39 percent for GAAP EPS; 15 percent for adjusted EPS; and 241 percent for net cash from operations. Based on year-to-date performance, fourth-quarter net sales expected to range between 1.7 billion dollars to 1.73 billion dollars; GAAP operating profit of 235 million dollars to 250 million dollars; adjusted operating profit of 276 million dollars to 291 million dollars; GAAP EPS for continuing operations of 0.46 dollar to 0.50 dollars, adjusted EPS for continuing operations of 0.57 dollar to 0.60 dollar, and net cash from operations of 542 million dollars to 592 million dollars.

Picture: HanesBrands