HanesBrands reports rise in Q1 net sales and earnings
Prachi Singh | Thursday, May 02 2019
For its first quarter, HanesBrands reported net sales increase of 8 percent to 1.59 billion dollars and organic sales in constant currency increase of 10 percent, the seventh consecutive quarter of constant-currency organic growth. The company said sales were fuelled by strong US activewear growth, broad-based international growth, and increased sales of US innerwear basics and globally, strong Champion sales growth accelerated. GAAP operating profit increased 1 percent to 148 million dollars, while adjusted operating profit increased 2 percent to 169 million dollars. GAAP diluted earnings per share in the quarter were 22 cents, while adjusted EPS increased 4 percent to 27 cents.
“We are delighted to continue our business momentum with a very strong first quarter,” said Hanes Chief Executive Officer Gerald W. Evans Jr. in a statement, adding, “We are generating broad-based growth across businesses and geographies. Our cash generation is on plan, our debt leverage is coming down, and our diversified business portfolio is paying dividends. We feel confident in achieving our long-term goals and enhancing value creation with our business model.”
Key callouts of Hanes’ first-quarter results
Hanes said that the 10 percent growth in constant-currency organic sales in the first quarter accelerated from the 6 percent growth rate in the fourth-quarter 2018. Growth initiatives drove a 75 percent increase in constant-currency global Champion sales outside the mass channel with strong double-digit increases in all regions. Total company consumer-direct sales, defined as brand retail stores and all online business, increased 16 percent and ecommerce sales increased for each of the innerwear, activewear and international segments.
The company added that it incurred an unexpected bad debt charge of 4 million dollars in the first quarter related to the insolvency of Heritage Sportswear, a US-based apparel wholesaler for the screen-print industry. The charge affected both GAAP and adjusted operating profit and lowered GAAP and adjusted EPS by approximately 1 cent.
US innerwear segment sales decreased 3 percent compared with expectations of a 4 percent decrease, while operating profit increased 3 percent, with the operating margin improving 130 basis points to 22 percent. Sales of innerwear basics increased 2 percent, while innerwear intimates decreased in line with company expectations. Sales increased for underwear, socks, and shapewear. Sales of innerwear in the online channel increased 6 percent.
US activewear segment sales increased 17 percent and operating profit increased 14 percent, while operating margin declined 30 basis points. Champion sales increased more than 80 percent outside the mass channel, while sales of Champion at mass retail declined approximately 3 percent. Hanes said, despite stronger than expected currency headwinds in the quarter, international segment sales increased 13 percent, while operating profit increased 20 percent, benefiting from increased volume and integration synergies. Organic constant-currency sales increased by more than a 100 million dollars, up 18 percent with regional growth in Europe, Asia, Australia and the Americas. The segment’s total innerwear and total activewear sales each increased.
Bras N Things growth, including increases in comparable-store sales, contributed to increased organic sales after the anniversary of its acquisition in February. The business contributed 18 million dollars in non-organic sales prior to the acquisition anniversary.
Hanes issues financial guidance for Q2, reaffirms FY19 forecast
Hanes has reiterated its full-year 2019 financial guidance issued February 7, 2019, and has issued guidance for the second quarter. The company expects 2019 net sales of 6.885 billion dollars to 6.985 billion dollars, GAAP operating profit of 900 million dollars to 930 million dollars, adjusted operating profit of 955 million dollars to 985 million dollars, GAAP EPS of 1.59 dollars to 1.67 dollars and adjusted EPS of 1.72 dollars to 1.80 dollars.
At the midpoint, the company said, the 2019 guidance versus 2018 results represents net sales growth of approximately 2 percent; GAAP and adjusted operating profit growth of 5 percent and 2 percent, respectively; GAAP and adjusted EPS growth of 7 percent and 3 percent.
For the second quarter, net sales are expected to be approximately 1.735 billion dollars to 1.765 billion dollars. GAAP operating profit is expected to be 223 million dollars to 233 million dollars and adjusted operating profit is expected to be 238 million dollars to 248 million dollars. GAAP EPS is expected to be 40 cents to 42 cents, and adjusted EPS is expected to be 43 cents to 45 cents.
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