WINSTON-SALEM, N.C. (AP) -- Shares of clothing maker Hanesbrands Inc. fell Wednesday as investors digested a conservative profit outlook that was below what analysts had expected.
The muted outlook came as the company reported a 21 percent increase in third-quarter net income.
Like other companies, Hanesbrand is still facing a challenging economy, both here and abroad. Moreover, Hanesbrand, a key supplier to J.C. Penney, is feeling the negative impact of the department store's move to scale back hundreds of sales in favor of everyday low prices. Since the pricing plan was implemented in early February, Penney has suffered severe sales declines. During a conference call with investors late Tuesday, Rich Noll CEO said that Penney was a "big drag" on sales, particularly in bras and other underwear.
The good news: Hanesbrands and other clothing makers, which had faced historically high cotton prices, are seeing those pressures recede. Hanes said all commodity costs have been fixed for the rest of the year and the company will incur "significantly lower" effects from inflation for cotton and other items, the company said.
"It's great to finally have the cotton bubble behind us," Noll said.
Net income for the three months ended Sept. 29 rose 21 percent to $109.9 million, or $1.09 per share, from $90.8 million, or 91 cents, per share. Analysts expected $1.05 per share, according to FactSet.
Revenue rose 3 percent to $1.22 billion from $1.19 billion last year. Analysts expected $1.22 billion.
Hanesbrands, based in Winston-Salem, N.C., adjusted its full year net income expectation to $2.54 to $2.60 per share from $2.50 to $2.60 per share. It expects revenue of $4.52 billion. Analysts had expected earnings of $2.55 per share on revenue of $4.54 billion.
The company also said it expects 2013 net income to be in the low $3-per-share range. Analysts expect $3.20 per share.
"We believe management is taking a cautious approach given a choppy consumer environment, weak international sales, and continued weak sales at (J.C. Penney)," wrote Susan Anderson, an analyst at Citi Investment Research in a note to clients.
Shares of Hanesbrands fell more 81 cents, more than 2 percent, to $32.54.