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Hanesbrands (HBI) Q2 Earnings Beat Estimates, Sales Up Y/Y

Zacks Equity Research

Hanesbrands Inc. HBI released second-quarter 2019 results, wherein the top and bottom lines exceeded estimates. Also, the company’s sales grew year over year, while earnings remained flat. Results were driven by robust performance at Activewear and International segments.

The company posted adjusted earnings of 45 cents a share, which outpaced the Zacks Consensus Estimate by a penny. However, quarterly earnings remained flat year over year.

Net sales improved around 3% to $1,761 million and also surpassed the Zacks Consensus Estimate of $1,752 million. On constant-currency (cc) basis, organic sales were up 5%, marking the company’s eighth straight quarter of growth. The upside in this quarter was backed by increased sales from Activewear and International units, mainly fueled by strength in Champion.

Hanesbrands Inc. Price, Consensus and EPS Surprise

 

Hanesbrands Inc. Price, Consensus and EPS Surprise

 

Hanesbrands Inc. price-consensus-eps-surprise-chart | Hanesbrands Inc. Quote

Global Champion sales soared more than 50%, excluding mass channel, backed by double-digit sales growth across all regions. Also, the company’s consumer-direct sales (including retail and online networks) rose 8% year over year.

Moving on, adjusted operating profit grew 0.6% to $246.6 million. However, adjusted operating margin contracted 30 basis points (bps) to 14%.

Segment Details

Innerwear: Sales dipped 2.3% in the quarter to $678.6 million due to softness across Innerwear intimates and Innerwear basics. Further, operating profit declined 6% to $149.5 million. Nevertheless, the company witnessed strong performance in the shapewear category. Also, it remains on track with its plans for the bra turnaround strategy.

Activewear: Sales advanced 10.5% to $448.3 million, courtesy of higher Champion sales. Also, sales of Champion at mass business grew roughly 8%. Operating profit rose 19.6% to $68.8 million.

International: Sales at this segment improved 4.2% to $568.9 million (up 10% at constant currency), boosted by solid growth across Europe, Asia and Australia, and sturdy sales in innerwear and activewear units. Operating profit at the International segment rose 5.9% to $81.1 million in the quarter.

Other: Sales declined 5.7% to roughly $65.2 million. This segment posted an operating profit of $6 million, down 15.8% year over year.

Other Financial Details

Hanesbrands ended the quarter with cash and cash equivalents of $257.9 million, long-term debt of $3,671.1 million and stockholders’ equity of $1,135 million. Also, the company generated $136.9 million in net cash from operations during the quarter.

Price Performance

In the past three months, this Zacks Rank #3 (Hold) stock has rallied 28.5%, outperforming the industry’s growth of 21.6%.

Guidance

Management retained its 2019 view and issued guidance for third-quarter 2019. For the third quarter, it anticipates the top line to be $1.84-$1.875 billion. Adjusted operating profit is expected to be $276-$286 million. Moreover, the company projects adjusted earnings to be 52-55 cents. The Zacks Consensus Estimate for the metric is pegged at 55 cents.

For 2019, net sales are predicted to be $6.885-$6.985 billion. GAAP operating profit is likely to be $900-$930 million. Adjusted operating profit is assumed to be $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.

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