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Hanesbrands Sinks 19% On Weak 4Q Outlook

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support@smarteranalyst.com (Ben Mahaney)
·2 min read
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Shares of apparel maker Hanesbrands fell 18.6% on Thursday as the company issued a weak outlook for the fourth quarter despite delivering better-than-expected results for the third quarter.

Hanesbrands’ (HBI) 3Q sales declined 3.1% year-over-year to $1.81 billion, exceeding the analysts’ estimate of $1.67 billion. A 37% rise in the company’s US innerwear sales due to the demand for protective garments was offset by a 41% decline in the US activewear business.

The weakness in the activewear business reflected lower sports apparel sales due to pandemic-related factors like canceled sporting events as well as the impact of the end of an exclusive contract with Target (TGT) to sell C9 Champion activewear line. Meanwhile, international sales declined 5% in 3Q. Adjusted EPS fell 10.6% to $0.42 due to margin pressure but was ahead of analysts’ forecast of $0.37.

For 4Q, the company said that it expects sales between $1.60 billion to $1.66 billion, which fell short of analysts’ consensus of $1.71 billion. The company sees further profitability headwinds in the form of negative manufacturing variances and higher selling, general and administrative expenses. It expects 4Q adjusted EPS in the range of $0.25 to $0.30 compared to analysts’ estimate of $0.45. Hanesbrands also said that it is launching an “in-depth business review” to prepare a long-term growth strategy. (See HBI stock analysis on TipRanks)

Recently, Credit Suisse analyst Michael Binetti increased the price target for Hanesbrands to $19 from $18 and reiterated a Buy rating.

The Street has a cautiously optimistic outlook on Hanesbrands. A Moderate Buy analyst consensus for the stock is based on 2 recent Buys. Following yesterday’s decline, shares are down 10.3% year-to-date. The average analyst price target of $18.50 reflects an upside potential of 39% in the coming months.

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