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Hanesbrands' (HBI) Stock Benefits from Acquisition Yields

Zacks Equity Research

Hanesbrands Inc. HBI has been successful at boosting investor’s confidence with its well planned acquisitions, strong e-Commerce platform and its Project Booster Program to improve investments. Most importantly, acquisition related synergies contributed to the company’s recently reported second-quarter 2017 results. Evidently shares of this Zacks Rank #2 (Buy) company have surged 20% in the past six months, outperforming the industry’s growth of 11.3%. Further, shares also depicted a 2.7% growth since the second-quarter results.

Let’s now delve deeper into some of the factors that have been contributing towards the performance of Hanesbrands in the recent times.

Acquisitions Driving Q2 Sales

During the second quarter, net sales of $1.65 million grew 12% from the year-ago period and came in line with the Zacks Consensus Estimate. The year-over-year increase was driven by acquisition related synergies that contributed approximately $220 million in net sales.  The benefits from acquisitions were mainly related to Champion Europe and Hanes Australasia that had been completed in 2016. In effect of the top-line improvement, adjusted earnings also depicted a 4% rise from the prior-year quarter.

Acquisitions and strong results in Asia and Europe were also seen to positively impact the company’s International Segment, which rose 76% during the second quarter.

Sturdy Online Platform

Customers are increasingly resorting to online shopping to save time. Hanesbrands is reallocating its personnel and marketing resources to capture this trend among consumers. The initiatives of the company in this respect also benefitted the company’s second-quarter results, wherein online channel sales increased 25%. The sales of Global Champion Activewear in the online segment were particularly strong during the second quarter season. Further, the management plans to utilize its size and scale to boost supply chain optimization along with the investment in its domestic distribution center network in order to cater to the online channel efficiently.

Project Booster Program

Hanesbrands launched a multiyear program in the first-quarter 2017 to drive investment for growth, minimize costs and increase cash flow. This program, which is well positioned for the next five years, is likely to boost the company’s Sell More Spend Less and Generate Cash strategy for additional gains, mainly from the global commercial and supply chain scale through acquisitions.

By 2019, this project is anticipated to produce nearly $150 million of annualized cost savings, out of which roughly $50 million will be reinvested in targeted growth opportunities. Additionally, this program, including the headcount reductions, is anticipated to be cost neutral for 2017 and cost savings would mainly be realized in the second half of the year.

Improvement in Organic Sales

Despite a decline in organic sales, the company has witnessed its trends to improve sequentially. Organic sales decline of 3% during the second quarter was narrower than the decline of 4% and 5% during the first quarter and the fourth quarter of 2016, respectively. Moreover, the company continues to expect organic sales to turn positive and contribute to growth in the second half. 


Although Hanesbrands’ strategic initiatives are worth applauding, its performance is exposed to certain headwinds such as the company’s over reliance on premium brands, soft sales in the brick-and-mortar stores as well as unfavorable foreign currency translations. However, Hanesbrands’ efforts are well placed to override these challenges and sustain the growth momentum.

Moreover, the company has a long term growth rate of 10.7% and a VGM Score of ‘B’, indicating its inherent strength.

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Better-ranked stocks in the same industry include Hasbro, Inc. HAS Lululemon Athletica Inc. LULU and SodaStream International Ltd. SODA all carrying a Zacks Rank #2. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hasbro has an average positive earnings surprise of 19% over the past four quarters. It has a long-term earnings growth rate of 11.7%.

Lululemon has an average positive earnings surprise of 5.7% over the past four quarters. It has a long-term earnings growth rate of 12.6%.

SodaStream has an average positive earnings surprise of 103.9% over the past four quarters. It has a long-term earnings growth rate of 7.5%.

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