Hanesbrands Surpasses Estimates - Analyst Blog
November 03 2011 - 4:15AM
Zacks
Hanesbrands Inc.
(HBI) reported earnings per share of 91 cents for its third quarter
2011, which was 44.4% higher than the prior-year quarter. The
result surpassed the Zacks Consensus Estimate of 82 cents by
10.9%.
Profits were primarily impacted by
strong net price, mix of products sold, and cost control
measures.
The company expects fourth-quarter
net sales of $1.2 billion - $1.3 billion and diluted EPS of $0.47 -
$0.57. For the full year, the company expects to generate earnings
of $2.75 - $2.85.
Revenues and Operating
Profits
Total revenue for the quarter
increased 4.8% to $1,230.18 million from $1,173.36 million in the
year-ago period. The growth in net sales was driven by strong
performance of the Socks and male underwear segment. This segment
posted the best sales figure boosted by the largest price hike in
it in the quarter.
Multiple price increase did not
affect demand and unit elasticity was running as per
expectation.
Hanesbrands delivered a record
operating margin expansion of 270 basis points (bps), coupled with
a gross profit margin inflation of 360 basis points, despite higher
cotton and commodity costs.
Segment
Details
Hanesbrands’ Outwear segment posted
maximum year-over-year growth of 11.1%, followed by the
International segment with growth of 12.3%. Net sales for the
Innerwear segment crawled up 0.5% from the year-ago quarter, while
both Hosiery and Direct to Consumer reported year-over-year decline
of 7.9% and 2.8%,respectively.
The strong performance of the
Outwear segment was fueled by ‘Gear For Sports’, but was partly
offset by other brands, particularly like Just My Size brand that
suffered due to wrong managerial policy .
Outerwear’s operating profit soared
45.0% to $55.6 million compared with $38.34 million a year ago. All
other segments also logged an uptrend in operating income in
the quarter, except the International and Hosiery segment, which
suffered a decline of 21.7% and 5.4% respectively.
Other Financial
Updates
The company exited the quarter with
cash and cash equivalents of $47.99 million and long-term debt of
$2,005.73 million. The company used $26.87 million for operating
activities. The amount used for investing activities totaled $65.23
million.
The company expects free cash flow
in the year 2011 to be in the range of $100 million to $200 million
and its leverage ratio to improve to between 3.0 to 3.5 times
EBITDA.
Our
Recommendation
Hanesbrands is a leading player in
the innerwear, casual wear and active wear markets in the U.S.
Moreover, the company commands a portfolio of well-recognized
flagship brands, including Hanes, Champion, Playtex and Bali, which
provides a competitive advantage to the company and reinforces its
well established position in the industry among stiff competitors
like Limited Brands Inc. (LTD) and
Maidenform Brands Inc. (MFB).
Hanesbrands is undertaking prudent
steps to optimize inventory levels in accordance with sales trends,
thereby improving margins and operating cash flow.
However, Hanesbrands’ debt-ridden
balance sheet and unfavorable foreign translations may weigh upon
both the top and bottom lines.
Hanesbrands currently holds a
short-term Zacks #3 Rank (Hold). On a long-term basis, we maintain
a ‘Neutral’ rating.
HANESBRANDS INC (HBI): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
MAIDENFORM BRND (MFB): Free Stock Analysis Report
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