The apparel retailer Hanesbrands Inc. (HBI) has retained its fiscal 2013 earnings guidance announced in the second quarter earnings conference call.
The Winston-Salem, NC-based company expects full-year 2013 earnings per share to be in a range of $3.50 to $3.65. It expects operating profits between $550 million and $575 million for the year. It expects net sales of $4.55 billion.
HBI estimates net sales of branded print wear to decline in the range of $40 million to $50 million for 2013. Free cash flow is expected to be approximately within $450 million to $550 million.
HBI had updated its fiscal 2013 guidance during the second quarter earnings conference. Previously it expected earnings to be in a range of $3.25 to $3.40. Operating profits was expected to be between $500 million and $550 million. Net sales were expected to be at $4.6 billion in fiscal 2013.
Hanesbrands had updated its guidance to reflect the decent second half performance. However, the net sales estimate was lowered to consider the decline of branded printwear products during fiscal 2013.
Fiscal 2014 Guidance
HBI expects to achieve earnings in the lower end of $4.00 range in fiscal 2014. The guidance reflects 10%-15% contribution from the Maidenform acquisition.
HBI has entered into a takeover agreement of Maidenform brands in July 2013. The deal is expected to close on Oct 8, 2013. Maidenform sells intimate apparel, a core category of Hanesbrands, is particularly encouraging. The acquisition will bring Maidenform’s popular brands like Flexees, Lilyette, Self Expressions and Sweet Nothings into Hanesbrands’ already-rich portfolio.
Moreover, with the acquisition, Hanesbrands will be able to expand its customer base to include the younger generation as average-figure bra business of Maidenform targeting younger buyers complements Hanesbrands’ full-figure bra business targeting older women.
Maidenform acquisition is expected to reap additional $500 million benefits in sales, $0.60 in earnings, $80 million of operating profit, and $65 million of free cash flow within three years of its completion.
Second Quarter Results
On Jul 31, Hanesbrands delivered second-quarter fiscal 2013 earnings which surpassed both prior-year quarter earnings and the Zacks Consensus Estimate by 77.6% and 24%, respectively. The upside was prompted by the success of HBI’s Innovate-to-Elevate strategy and lower comparable base in the prior-year quarter due to higher cotton cost. Net sales also benefited from strong results in the Innerwear segment.
Gross profit surged 18.7% backed by lower cost of sales following shutdown of underperforming businesses. Lower cotton cost benefited the company’s operating profit margin which shot up 51.3% year over year.
Hanesbrands carries a Zacks Rank #1 (Strong Buy). Other stocks worth considering are Michael Kors Holdings Ltd (KORS), Citi Trends Inc. (CTRN) and Kirkland’s Inc. (KIRK) all carrying a Zacks Rank#1 (Strong Buy).