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Hanesbrands (HBI) Q1 Earnings & Sales Surpass Estimates

Zacks Equity Research

Hanesbrands Inc. HBI released first-quarter 2019 results wherein the top and the bottom line exceeded estimates and grew year over year. Results were driven by robust growth across all businesses and regions. Also, increased sales in Innerwear segment in Asia, Australia and the Americas along with higher sales in Innerwear basics for the second successive quarter contributed to quarterly results. 

Q1 in Detail

The company posted adjusted earnings of 27 cents a share, outpacing the Zacks Consensus Estimate of 25 cents. However, quarterly earnings rose 4% year over year from 26 cents in the year-ago period. 

Further, net sales improved 8% to $1,588 million and also surpassed the Zacks Consensus Estimate of $1,534 million. On constant currency (cc) basis, organic sales were up 10%, marking the company’s seventh straight quarterly increase. This upside was backed by increased sales from Innerwear basics, Activewear and International units, mainly fueled by strength in Champion. 

Moreover, Global Champion sales soared more than 75% at cc excluding mass channel backed by sales growth in double-digits across all regions. Also, the company’s consumer-direct sales (including retail and online networks) increased 16% year over year owing to solid e-commerce sales in mostly all its segments.

Moving on, adjusted operating profit inched up 2.3% to $169.4 million. However, adjusted operating margin contracted 60 basis points (bps) to 10.7% due to a $4-million bad-debt charge related to the insolvency of Heritage Sportswear.

Hanesbrands Inc. Price, Consensus and EPS Surprise

Hanesbrands Inc. Price, Consensus and EPS Surprise | Hanesbrands Inc. Quote

Segment Details

Innerwear: Sales dipped 3% in the quarter to $475.9 million due to softness across Innerwear intimates, somewhat offset by growth at Innerwear basics. However, operating profit got nudged up 3% to $104.6 million. Further, the company has witnessed strong performances in underwear, socks and shapewear categories. It remains on track with its plans for the bra turnaround strategy.

Activewear: Sales advanced 17% to $405.3 million, courtesy of higher sales at Champion. However, sales of Champion at mass retail slipped roughly 3%. Further, operating profits increased 14% to $43.6 million.

International: Sales at this segment improved 13% to $646.2 million, boosted by solid growth across Europe, Asia, Australia and the Americas and sturdy sales in innerwear and activewear. Organic sales rose 18% on currency-neutral basis, banking on contributions from Bras N Things within a year of its buyout. Operating profit at this segment jumped 20% to $92.7 million in the quarter, riding on organic growth, contribution from Bras N Things and integration synergies.

Other: Sales declined 6% to roughly $60.6 million. This segment posted an operating profit of $0.8 million, down 71.3% year over year.

Other Financial Details

Hanesbrands ended the quarter with cash and cash equivalents of $287.1 million, long-term debt of $3,615.5 million and equity of $1,038 million. Also, the company generated $194.3 million in net cash from operations during the quarter.

Price Performance

In the past three months, this Zacks Rank #3 (Hold) stock has rallied 18%, outperforming the industry’s 12.5% growth.


Management has retained its 2019 view and issued a new one for second-quarter 2019. For the second quarter, it anticipates the company’s top line to be $1.735-$1.765 million. Adjusted operating profit is expected to be $238-$248 million. Moreover, the company projects adjusted earnings to be 43-45 cents. The Zacks Consensus Estimate for the metric is pegged at 48 cents.

Effective tax-rate for the second quarter is forecast at roughly 14%. Further, it estimates more than 365 million shares outstanding. 

For 2019, the company issued an initial outlook. Net sales are predicted in the $6.885-$6.985 billion range. While GAAP operating profit is likely to be in the $900-$930 million band. Adjusted operating profit is assumed within $955-$985 million. Further, the company envisions adjusted earnings of $1.72-$1.80 for the year along with net cash from operations of $700-$800 million. 

At the mid-point, the current guidance for the year reflects year-over-year growth of roughly 2% in net sales, 5% in operating profit on a GAAP basis and 2% in adjusted operating profit. Further, the guidance represents mid-point growth of 7% and 3% for GAAP and adjusted earnings, respectively, coupled with a 17% improvement in operating cash flow.

Effective tax-rate for 2019 is hoped to be almost 14%. Further, it anticipates roughly 366 million shares outstanding. 

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lululemon athletica LULU has a long-term earnings per share growth rate of 18.4% and is a Zacks #1 Ranked player.

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