Recent acquisitions boost HanesBrands Q3 profit

Thursday, 29 October 2015

REPORTHanesBrands reported double-digit growth for net sales, adjusted operating profit and adjusted earnings per share for the third quarter. Net sales increased 14 percent to 1.59 billion dollars and core sales, which exclude acquisitions and a retailer exit from Canada, increased 3 percent in constant currency.

“We had another great quarter of double-digit growth that reflects our continued value-creation potential,” Hanes Chairman and Chief Executive Officer Richard A. Noll said, adding, “We again have increased our operating profit and EPS guidance as we continue to drive growth and margin improvement through innovation and acquisition integration.”

Growth witnessed in the seventh consecutive quarter

The company said that seventh consecutive quarter of record results was driven by continued acquisition benefits, global supply chain performance and core sales and margin growth in the innerwear and activewear segments.

Adjusted operating profit excluding actions increased 16 percent to 251 million dollars, and adjusted EPS excluding actions increased 16 percent to 0.50 dollar. On a GAAP basis, operating profit increased 35 percent to 208 million dollars and EPS increased 38 percent to 0.40 dollar.

Innerwear sales increased 3 percent, and activewear sales, excluding acquisition benefits, increased 2 percent. In constant currency, total company core net sales increased 3 percent, excluding acquisitions and the exit of a retailer from Canada. The company’s adjusted operating profit margin increased 30 basis points in the third quarter to 15.8 percent. Innerwear and activewear operating profit margins increased by 40 basis points and 230 basis points, respectively, as a result of strong supply chain performance and ‘Innovate-to-Elevate’ benefits.

Acquisitions boosted net sales

The April 2015 acquisition of Knights Apparel, a licensed apparel leader, added net sales of 84 million dollars to activewear results in the third quarter. In the international segment, DBApparel, a leading marketer of intimate apparel and underwear in Europe that was acquired August 29, 2014, contributed net sales of 179 million dollars.

The integration of DBApparel is underway following the completion of consultations with appropriate works councils and unions, while implementation of the Knights Apparel integration plan will begin late in the fourth quarter of 2015.

Sales of intimates rebounded with high-single-digit growth on strength in bras and shapewear. Sales of basics were up slightly versus the year-ago quarter. Activewear results in the quarter were strong with net sales growth of 22 percent and operating profit growth of 39 percent driven by double-digit Champion growth and the acquisition of Knights Apparel.

International sales and operating profit increased significantly, despite negative foreign currency impacts, as a result of the acquisition of DBApparel in Europe and strong results in Japan.

Updates 2015 financial outlook

Based on year-to-date results and the outlook for the remaining quarter of the year, Hanes has refined its full-year 2015 guidance for net sales and increased guidance for adjusted operating profit and adjusted EPS. The company expects full-year net sales of approximately 5.85 billion dollars and fourth-quarter net sales of approximately 1.525 billion dollars. Previous guidance for full-year net sales was slightly less than 5.9 billion dollars.

The growth of core sales, which exclude acquisitions and a retailer exit from Canada, are expected to be approximately 2 percent for the full year and 3 percent for the fourth quarter, when adjusting for currency fluctuations and the impact of last year’s 53rd week. To reflect higher profit margins, the company has increased its guidance for full-year adjusted operating profit to a range of 880 million dollars to 890 million dollars, or approximately 231 million dollars to 241 million dollars in the fourth quarter. The previous full-year guidance range was 855 million dollars to 875 million dollars.

Full-year expectations for adjusted EPS have been updated to a range of 1.66 dollars to 1.68 dollars, or 0.44 dollar to 0.46 dollar for the fourth quarter. Previous full-year guidance was 1.61 dollars to 1.66 dollars. The guidance reflects full-year expectations for the acquisitions of Knights Apparel and DBApparel. Knights Apparel is expected to contribute net sales of approximately 160 million dollars and adjusted operating profit of approximately 22 million dollars. DBApparel is expected to contribute approximately 630 million euros (688.4 million dollars) in net sales and approximately 40 million euros (43.7 million dollars) in adjusted operating profit.