(Filed Under Financial and General Interest News). HanesBrands reported net income for the first quarter of 2013 of $51.4 million on declining sales of $945.5 million, compared with a loss in the same period last year of $26.8 million on sales of $973.1 million. The firm blamed the sales decline on “a sluggish retail environment,” but noted “the company’s operating profit margin expanded 790 basis points over the year-ago quarter, benefitting from an improved cotton-cost and product-pricing environment” and its “Innovate-to-Elevate margin-enhancement initiatives.”
Based on the results of the quarter ended March 30, “Hanes reaffirms its 2013 guidance for net sales of approximately $4.6 billion; operating profit of $500 million to $550 million; EPS of $3.25 to $3.40; and free cash flow of approximately $350 million to $450 million,” according to a company release. HanesBrands also emphasized that it had “recently announced the initiation of a regular quarterly dividend. The company’s Board of Directors has authorized a dividend of $0.20 per share to be paid June 3, 2013, to stockholders of record at the close of business on May 20, 2013. The quarterly dividend is the first for Hanes since its spinoff as an independent public company in 2006.”
Chairman and CEO Richard Noll said of the results, ““We are pleased with our ongoing strategic execution, which resulted in improved profitability in the first quarter and bolsters our outlook for the rest of the year. Our operating profit margin was strong, our brands are commanding more retail shelf space, and our product innovation is working. We have more margin improvement potential ahead of us.”
A company statement that accompanied the financial results noted that “The company continues to secure net space gains at retailers through its Innovate-to-Elevate platforms, which integrate the strengths of the company’s iconic brands, low-cost supply chain and product innovation. These platforms include ComfortBlend fabric underwear, socks and T-shirts, Smart Sizes seamless bras, and Tagless apparel.” It also stated it “achieved a first-quarter operating margin of 9 percent. Innovate-to-Elevate initiatives, which support higher unit selling prices and lower unit costs, and lower cotton costs drove a nearly 800-basis-point improvement in operating margin over the first quarter a year-ago.” And Hanes said it “continues to focus on inventory management, with its quarter-ending inventory level 17 percent lower than a year ago.”
Despite its overall success, Hanes said sales in its innerwear segment “were affected by the soft retail environment, but operating margin improved significantly over a year ago. New products continued to perform well.” It added that “Innerwear operating profit increased 69 percent, and operating margin increased 760 basis points to 18 percent.
The company also pointed to its “Strong bra and sock sales in soft sales environment,” stating that “Net sales for the segment declined 2 percent overall in the quarter, but [that its own] bra and sock sales increased mid-single digits and men’s underwear was up slightly. Hanes ComfortBlend men’s underwear, panties and socks continue to perform well, as do Bali and barely there Smart Size seamless bras.”
In its “activewear segment, formerly named Outerwear,” the company “had a strong first quarter, with increased margins and a return to operating profitability.” Hanes explained that “activewear sales declined 2 percent, but excluding the $15 million planned reduction of commodity-oriented branded printwear sales to the screen-print industry, segment sales increased 4 percent. Retail Hanes sales increased by double digits, and retail Champion and C9 by Champion sales increased by low single digits.” It added that “The segment returned to profitability, with an operating margin of 8 percent compared with an operating loss a year ago.”
International sales “declined 5 percent and operating profit declined by 53 percent. On a constant currency basis, net sales increased 1 percent and operating profit declined 42 percent.” In addition, “Direct to Consumer sales decreased by 6 percent, while operating profit was slightly positive compared with a loss in the year-ago quarter.”
Looking at the rest of 2013, Hanes said it expects “a decline in branded printwear sales of $40 million to $50 million from rationalization that began in mid-2012; of the expected decline, $15 million occurred in the first quarter,” according to the company release. Hanes also “expects its overall media investment in 2013 to increase by $30 million to $40 million, with more than two-thirds of the increase in the second half of the year.”
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