(Filed Under wholesale Lingerie News). HanesBrands is still hungry to devour more companies, even after buying DBApparel for $528 million earlier this year and Maidenform for $583 million in 2013.
HanesBrands chairman and CEO Richard Noll, in a conference call at the end of October with Wall Street analysts to discuss the company’s third quarter financial results, (see story in BODY) repeatedly mentioned his desire to expand the company through acquisitions.
Of course Noll also expects organic growth from Hanes’ existing businesses, but as he sees it, the vertical supply chain Hanes now possesses is so profitable and efficient compared to what else is out there, buying businesses and running their products through the Hanes production system will be an winning strategy far into the future. It is interesting to note that Noll is specifically targeting companies, and there are many out there, that long ago sold off — or never even owned — their own production facilities.
“Our organization is executing very, very well,” Noll boasted. “Our marketing teams are connecting with our consumers, our sales teams are working well with retailers, our supply chain teams continue to increase efficiency, our IT and administrative teams are digitizing processes and our entire organization is effectively integrating acquisitions. This superb execution has led to EPS doubling in just 2 years and it supports our belief that we can continue increasing earnings at double-digit rates for many years to come.”
Speaking of Hanes’ production capabilities, Noll emphasized “it’s our vertically integrated company-owned supply chain that is truly the foundation of our business model. It is what enables Innovate-to-Elevate. It enhances margin through ongoing offering efficiencies and it represents the leverage point for creating value with acquisitions. By driving more and more volume through our supply chain with acquisitions, we can generate substantial cost synergies, and therefore, create significant opportunity for margin improvement. We saw this with Gear for Sports and we’re seeing it with Maidenform, and we expect to see it with DBA and all of our future acquisitions.”
Again and again in the call, Noll emphasized his company’s “core competency in acquisition integration.” And in answer to a question about what kinds of acquisitions Hanes might consider, Noll replied, “we have very strict criteria that guide our acquisition thinking, one being in our core categories and the second one is being able to leverage that global supply chain where we can create a lot of value for our shareholders. And when you think about the types of companies, domestically and globally, that are in our core categories, that actually, over the last decade or so, got out of their supply chains, we believe we’ve got a lot of opportunity to continue to create value through acquisitions for many years. And it’s why it’s become one of, not the only, but just one of our strategic initiatives to create value and we think we’re doing it well.”
In answer to a question about opportunities in Europe, Noll explained that there are many brands that do well in certain countries but not in others, even though consumers across the board “are looking for the same types of things in innerwear products in a lot of those countries as they are in United States, Mexico, Canada or Brazil.” His acquisition strategy will succeed in Europe because “we’re going to be able to get scale advantages by driving Innovate-to-Elevate platform innovation across as well as leveraging our global supply chain. So I think from our perspective, acquisitions work extremely well in this. You can buy strong #1 or #2 positions, plug them into your global platforms and supply chain and really create a lot of shareholder value.
Noll pointed to Germany where Hanes has “a strong position in hosiery, [but] we don’t necessarily have a strong position in men’s underwear or even women’s intimate apparel. We’ve got efforts to drive organic growth there. But an acquisition in that market might not be out of the question from a long-term prospect.” He cautioned, however, that “I’m not saying that we’re focused on any target there today,” and added that Hanes would consider a variety of categories and countries.
Asked about possible acquisitions in Asia, Noll reponded, “we don’t necessarily have anything that prioritizes one acquisition over another after that. So we don’t -- we’re not prioritizing Europe over Asia or domestic or Innerwear over Activewear. Once things get -- through that screen, we look at all of the opportunities we’d have. And when a deal looks right for us and for the other side and we can make a deal that’s going to be in interest of our shareholders, we’ll go ahead and do so. So there’s no real sub-prioritization. So Asia, we’ve done some acquisitions there, some small acquisitions over time. It’s either not off of our radar screen nor is it the next highest priority either. It’s just in the mix.”
The complete transcript of the conference call can be found here:
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