Basic apparel is needed every day. As people consider clothing daily, so they should consider the manufacturer also in their portfolios.
Hanesbrands Inc. (HBI, Financial) (founded in 2005), the leader in basic apparel, is playing well. This consumer goods company designs, manufactures, sources and sells various basic apparel primarily in the U.S., Canada, Mexico and other leading markets in the Americas, Asia and Europe.
This Winston-Salem, North Carolina-based company operates in four segments: Innerwear, Activewear, Direct to Consumer and International. Its innerwear and activewear apparel brands include Hanes, Champion, Playtex, Bali, Maidenform, Flexees, JMS/Just My Size, barely there, Wonderbra and Gear for Sports. In addition, the company’s international brands include Zorba, Sol y Oro, Rinbros, Track N Field and Ritmo. Hanesbrands also offers its products through retailers and wholesalers as well as directly to consumers.
It reported record first-quarter results and is poised to grow. The company made a very good start and is on track to deliver another year of double-digit EPS growth. The record results reflect the benefits of the company’s multiyear acquisition strategy and continued improvement in core business operating margin.
First-quarter results
Net sales increased by 1% and were $1.22 billion during the first quarter.
Adjusted operating profit excluding actions increased by 10% and was $147 million.
Adjusted EPS excluding actions increased by 18% and was 26 cents.
On a GAAP basis, operating profit increased by 36% and was $122 million and EPS increased by 62% and was 21 cents.
On a GAAP basis, operating profit margin for the first quarter was 10% (an increase of 7.4% from the prior-year quarter).
The company repurchased 14.2 million shares of stock in the first quarter for $380 million.
Positive attributes of the first quarter
- Acquisition contributions.
- Margin increase.
- Innerwear and Activewear sales increase.
Expectations for 2016
| Metrics | Range |
| GAAP diluted EPS | To range between $1.63 and $1.73 |
| GAAP operating profit | To be between $835 million and $865 million |
| Net sales | To be between $5.8 billion and $5.9 billion |
| Adjusted operating profit | To be between $920 million and $950 million |
| Adjusted EPS | To be between $1.85 and $1.91 |
| Net cash from operations | To be in the range of $750 million and $850 million |
| Capex | To be approximately $70 million |
| Other expenses | To be between $115 million and $120 million |
| Full year tax rate | To be between 10% and 11% |
Dividend
The regular quarterly cash dividend of 11 cents per share will be paid June 7 to stockholders of record at the close of business May 17. The dividend is the 13th consecutive quarterly return of cash to stockholders since Hanes initiated its cash dividend program in April 2013.
Focus
- Sales initiatives.
- Reaping acquisition synergies.
- Expanding margins.
- Developing growth plans for the pending acquisition of Champion Europe.
Recognition
It has been recognized by Forbes magazine as one of America’s Best Employers in 2016, the second workplace honor for the company in the past year.
Of the 500 large employers making the magazine’s annual list this year, Hanes ranks as the No. 167 most recommended by its employees. The company ranked fourth-highest of the 17 clothing industry companies making the list. In 2015, the Great Place to Work Institute named Hanes the third-best multinational company to work for in Central America and the Caribbean, making the company the first-ever apparel manufacturer to be recognized by the institute in Central America and the Caribbean.
(Source: Company’s website)
Acquisition plans
Hanesbrands plans to acquire Champion Europe, which owns the trademark for the Champion brand in Europe, the Middle East and Africa. Purchase price is decided at 10 times actual calendar 2016 earnings before interest, taxes, depreciation and amortization, subject to adjustment for cash, debt and working capital. The acquisition is expected to close somewhere in the middle of this year. This acquisition is going to give Hanesbrands a powerful platform. Hanesbrands is doing well after the recent acquisitions, and this acquisition is also expected to add to the synergies.
On a concluding note
Hanesbrands' greatest assets are strong brands, a stable and predictable annual business model, growth in earnings per share, an increase in net income, revenue growth, expanding profit margins and solid stock price performance. The company’s innovate-to-elevate strategy, self-owned supply chain and substantial cash flow will help to deliver superior shareholder returns over time. This leading manufacturer will continue this trend and won’t let its valued investors down.
Disclosure: I do not hold any position in the company.
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