LB LandBridge Company LLC

Hanesbrands Inc. (HBI) is scheduled to report its third-quarter 2011 financial results on Thursday, April 20, 2011. Currently, the Zacks Consensus Estimate is 33 cents per share and sales estimate is around $1,009 million.

Third-Quarter 2011, a Synopsis

Hanesbrands, which faces stiff competition from Limited Brands Inc. (LTD) and Maidenform Brands Inc. (MFB), reported fourth quarter earnings of 29 cents, missing the Zacks Consensus estimate of 31 cents. The earnings per share reported by the retailing giant were 30% higher than the prior-year quarter. Profits were primarily impacted by debt-refinancing expenses, higher cotton costs and promotional expenses.

For fiscal 2010, the company reported earnings of $2.16 per share compared to 54 cents in fiscal 2009. However, earnings were below the Zacks Consensus Estimate of $2.66.

During the quarter, total sales climbed up16.3% to $1,149 billion from $988 million in the prior-year quarter. The rise was primarily attributable to promotional initiatives, increase in shelf space, growth in retail sales and inventory restocking.

Further, the company’s acquisition of “Gear for Sports” also contributed positively to the top line by 0.4%. Revenues were well ahead of the Zacks Consensus Estimate of $1,009 million.

Annual revenues grew 11.2% year-over year to $4.33 billion, which was below the Zacks Consensus estimate of $484 billion.

Management Guided

For fiscal 2011, the company expects continued double-digit growth in revenues in the range of $4.85 billion to $5.0 billion. Further, the company expects to implement price increases during 2011 primarily due to higher cotton costs. Price increases will vary from flat to low-single digits (up more than 30%) for cotton-intensive categories. 

Third-Quarter 2011 Zacks Consensus

Analysts covered by Zacks expect Hanesbrands to post third-quarter 2011 earnings of 84 cents a share. The current Zacks Consensus remains flat from the year ago period and ranges within a low of $0.30 to a high of $0.36.

The current estimate inched down by 1 cent over the last 7 days as 2 analysts revised its estimate.

Our Recommendation

Hanesbrands is a leading player in innerwear, casual wear and active wear markets in the U.S. Moreover, the company’s portfolio consists of well-recognized flagship brands such as Hanes, Champion, Playtex and Bali, which provides a competitive advantage to the company and reinforces its well established position in the industry.

The company remains optimistic about its earnings and sales outlook compared to its peers due to endogenous factors like market share gains, restructuring investments, and development of new supply chain. Besides, the cost saving initiatives offset the incremental expenses related to selling, marketing, and promotion of the products, thus reducing margin pressure.

However, Hanesbrands faces intense competition in both domestic and international markets from other established players, including Berkshire Hathaway Inc. (through subsidiaries Russel Corp. and Fruit of the Loom Inc.), Nike Inc., Adidas AG, Warnaco Group Inc., Maidenform Brands Inc. and Gildan Activewear Inc.

Hanesbrands currently holds a Zacks #2 Rank. On a long-term basis, we maintain a Neutral rating on the stock, but hold a short-term Buy rating.

 
HANESBRANDS INC (HBI): Free Stock Analysis Report
 
LIMITED INC (LTD): Free Stock Analysis Report
 
MAIDENFORM BRND (MFB): Free Stock Analysis Report
 
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