(Filed Under Financial and General Interest News). HanesBrands reported 5% lower income of $118.9 million on 17% higher sales of $1.40 billion for its third quarter ended September 30, compared to income of $125.3 million on sales of $1.20 billion for the same period last year.
For the first nine months, income rose to $315.1 million on sales of $3.80 billion, compared to income of $298.2 million on sales of $3.34 billion in 2013.
“Our business continues to perform very well, particularly in an uncertain consumer environment,” Hanes chairman and CEO Richard Noll said in explaining the results. “We have delivered more earnings in the first three quarters of 2014 than we did all of last year. Our Innovate-to-Elevate strategy, global self-owned supply chain, and acquisitions continue to generate shareholder value and give us confidence in our potential for many years to come.”
Recent Hanes acquisitions include Maidenform in 2013 and DBApparel earlier this year, and the company noted that in terms of net sales, “Maidenform contributed $115 million in the third quarter, and DBApparel contributed $81 million. Excluding the acquisition contributions, net sales on a constant currency basis increased 1 percent versus the year-ago quarter.”
Pointing to other successes in the third quarter, Hanes said “Strong global supply chain performance and Innovate-to-Elevate drove a 100-basis-point improvement in adjusted operating profit margin year-over-year in the third quarter, excluding DBApparel. Overall, including DBA, adjusted operating margin increased 70 basis points.”
The company also announced that its “Maidenform integration [was] successfully completed” noting that it had completed the integration “within one year of the acquisition closing. From here on, Maidenform brand results will be part of the company’s core business in its Innerwear, International and Direct to Consumer segments. The company remains on schedule for capturing synergies from the acquisition and integration, including ramp up of internalized production of select Maidenform intimate apparel styles in Hanes’ self-owned supply chain.”
“Hanes has begun cross-company integration planning for DBA and expects to create significant synergies by applying Hanes’ Innovate-to-Elevate strategy in Europe and leveraging its primarily self-owned global supply chain. The company expects the acquisition and synergies to add approximately $1.00 of annual adjusted EPS within three to four years.”
Listing “business highlights,” Hanes stated “Innerwear net sales increased 16 percent in the third quarter as a result of the Maidenform acquisition, while the company’s base business was up slightly compared with a year ago. Operating profit increased 29 percent on acquisition benefits and increased base-business profitability.”
The company acknowledged that “Sales in the quarter were affected by a continued uneven and challenging retail environment. Sales growth of at least mid-single digits in socks, boys’ underwear, and panties were offset by softness in other Innerwear categories. Innovation platforms, including ComfortBlend and X-Temp underwear and Flexible Fit bras, continued to outperform their respective categories.”
In terms of profitability, “Innerwear’s operating profit margin increased 200 basis points to 19.8 percent as a result of strong supply chain performance and Innovate-to-Elevate,” while “Activewear sales increased 5 percent, while operating profit declined 1 percent versus a strong year-ago third quarter.”
The company added that “The segment’s operating profit margin was 16.1 percent in the third quarter, and the year-to-date operating margin of 14.1 percent is 95 basis points better than a year ago.”
“Retail Activewear sales increased by 1 percent, while Gear for Sports sales increased by double digits.”
Outside of the U.S., Hanes explained, “The acquisitions of Maidenform and DBApparel contributed to international sales growth of 63 percent and operating profit growth of 74 percent in the third quarter, while foreign exchange rates on currency continued to have a negative impact on both measures. On a constant-currency basis, base international net sales decreased 3 percent in the quarter and operating profit decreased 1 percent.”
“Net sales for the Direct to Consumer segment increased 13 percent and operating profit increased 6 percent in the third quarter, with the acquisition of Maidenform contributing to both comparisons versus the year-ago quarter.”
For the year, “Hanes’ guidance range for net sales remains approximately $5.350 billion to $5.375 billion. The company has increased guidance for adjusted operating profit to a range of $750 million to $770 million, up from the previous guidance range of $735 million to $755 million.”
“On a GAAP basis, full-year 2014 diluted EPS will vary depending on actual performance, charges and tax rate. GAAP diluted EPS could be in the range of approximately $3.95 to $4.15. GAAP operating profit for 2014 could be in the range of approximately $560 million to $590 million.”
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