Hanesbrands hit annual high on DBApparel takeover

Friday, 05 September 2014

Shares of Hanesbrands, Inc. (HBI) reached a new 52-week high of 107.87 dollars on Sep 5 after the company raised its fiscal guidance following the completion of the DBApparel (DBA) takeover.

As analysts at Zacks have highlighted, “In fact, shares of this apparel retailer has been on the rise for the past few months as it has been reporting decent earnings results backed by its margin-enhancing Innovate-to-Elevate strategy. Shares of this textile retailer eventually closed at 104.65 dollars, recording a healthy year-to-date return of 54.2 percent.”

It is noteworthy that on Sep 3, 2014, Hanesbrands raised its earnings and sales guidance for fiscal 2014 following the completion of takeover of Europe-based intimate apparel company DBApparel on Aug 29, 2014 for 400 million euros.

Hanesbrands – which expects to start the integration of DBA immediately – now estimates net sales to come in at a range of 5.35 to 5.38 billion dollars, up from approximately 5.08 billion dollars as expected earlier.

Hanesbrands expects the DBA acquisition to also have a positive effect on the company's corporate tax rate. Likewise, the retailer expects operating profit in the range of 735 to 755 million dollars as opposed to its earlier guidance range of 710 to 730 million dollars.

Hanesbrands has also raised its earnings per share guidance to a range of 5.40 to 5.60 dollars. “The raised guidance reflects DBA's contributions to sales, adjusted operating profit and corporate tax rate. However the takeover is expected to increase the interest expense of the company.“

Hanesbrands currently has a Zacks Rank #1 (‘Strong Buy’) recommendation as the equity research firm says that “The company is on a roll with two back-to-back acquisitions in the past one year. The DBA acquisition was preceded by the buyout of underwear apparel chain, Maidenform Brands Inc. in Oct 2013. These frequent strategic takeovers will bolster its presence in the global intimate apparel and hosiery category.”

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