(Filed Under Financial and General Interest News). Hanesbrands recorded double the net income in 2013 that it did in 2012, despite a fourth quarter 2013 in which net income fell from $80.4 million in 2012 to $32.3 million. Full year sales in 2013 were $4.628 billion compared to $4.526 billion the year before as profits rose from $164.7 million to $330.5 million.
Sales in the fourth quarter rose from $1.153 billion to $1.286 billion and the company attributed much of the growth to its recent purchase of Maidenform. “The acquisition of Maidenform Brands, Inc., contributed 9 percentage points of sales growth in the quarter, while strong results for the remainder of the company contributed 3 percentage points of growth,” the company stated in a press release filed with the SEC that accompanied its financial reporting.
Hanes explained “Planned increases in advertising and debt-reduction costs muted fourth-quarter performance.”
The company also noted that it “expected net sales of slightly less than $5.1 billion” for 2014 and said it was raising its 2014 full year earnings guidance, “including adjusted EPS expectations of $4.60 to $4.80.”
In discussing the Maidenform acquisition, Hanes noted it is “in the process of integrating Maidenform’s front-end, supply chain, and distribution/logistics operations into its existing organization” adding that it “anticipates closing the Maidenform New Jersey headquarters and Fayetteville, N.C., distribution center by the end of 2014.”
According to HanesBrands, “In the fourth quarter, Maidenform contributed net sales of approximately $100 million and operating profit of approximately $1 million.”
However, looking ahead, the company said it expects “its acquisition of Maidenform to contribute approximately $500 million in sales and approximately $25 million of operating profit in 2014.
In discussing its entire “innerwear segment” Hanes noted that “Innerwear net sales increased 20 percent in the fourth quarter and 5 percent for the full year. While Maidenform sales significantly contributed to growth, non-Maidenform sales also increased in each period. Operating profit declined $5 million as a result of $17 million of increased advertising investment.”
“Excluding Maidenform contributions, sales increased 6 percent in the fourth quarter. Sales of socks and panties were up double digits, men’s underwear up high single digits, and bras up mid-single digits. For the year, excluding Maidenform, net sales increased 1 percent with socks and men’s underwear driving growth.”
Hanes also claimed that “The company’s brands gained market share during the fourth quarter, and Innovate-to-Elevate product platforms continue to succeed. Hanes ComfortBlend socks and men’s underwear, Hanes X-Temp underwear, and Smart Size bras across several brands, including Bali, are all outperforming their respective categories.”
In a section titled “Maidenform Integration” the press release notes that “Hanes expects to achieve full synergies from the integration of its Maidenform acquisition within three years. After full synergies, the acquisition is expected to annually contribute more than $500 million in net sales, $80 million in operating profit, and $0.60 of EPS.”
“Synergies are expected from selling, general and administrative savings as a result of the elimination of duplicative corporate and operational costs; cost of goods sold savings as a result of the integration of Maidenform’s 100 percent sourced production model into Hanes’ predominately self-owned manufacturing operations, supplemented by sourcing; and complementary revenue, driven by the application of Hanes’ Innovate-to-Elevate strategy to Maidenform’s products.”
The statement added, “The majority of the corporate SG&A savings are anticipated to begin by mid-2014. Benefits of supply chain actions to cost of goods sold are expected to start in 2015 and be fully realized in 2016. Complementary revenue opportunities are expected to deliver benefits in late 2015, with the majority of the benefits coming in 2016.”
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