(Filed Under Financial and General Interest News). While HanesBrands net sales rose over 13% for the quarter and six months ended July 4th, net income for the periods dropped 36.6% and 24.8% respectively.
And while Hanes said its share of the innnerwear category is actually growing, chairman Richard Noll pointed to a trend over the past year, where, industry wide, “basics has decelerated but [is] still positive. Intimates is actually down.”
Meanwhile, one of the most interesting things to come out of the conference call to discuss the latest Hanes results was the number of times Noll used the word “acquisition” or “acquisitions” in discussing his company’s intentions: 26.
Hanes innerwear sales in the second quarter dropped 1.4% to $777.6 million from $788.3 million for the quarter ended June 28, 2014. In the first half of the year, innerwear sales dropped 2.6% from $1.369 billion last year to $1.324 this year. The company breaks out its sales into four categories: innerwear (by far the largest), activewear, direct to consumer and international.
As a whole, the company reported net income in the second quarter of $94.9 million on sales of $1.522 billion compared to net income of $154.6 million on sales of $1.342 billion.
In the second quarter, the company explained, “Sales of basics, including underwear and socks, increased while intimate apparel sales decreased. The consumer sales environment remains uneven.”
Noll expanded on this in the conference call, noting “First and foremost, the overall macro environment isn’t that great right now. In fact, when we look at both, our total Innerwear basics and intimates, we are seeing a deceleration of actually industry growth. In fact, basics has decelerated but still positive. Intimates is actually down. Given that in those environments we are gaining share, so our overall business is sound in terms of some of the tactics with the weakness in the near-term.”
Gerald Evans, chief operating officer, added “we had a positive trend in our Innerwear sales from Q1 to Q2 and driven by our basics business, which was up mid-single digits in the quarter. We feel real good about that. As Rich mentioned, the category and basics is growing. We are up a share point in the overall basics category and our underwear business is up 2 points.” He said the growth in share was due to “Our innovation, our strong brand position.”
Evans continued, “As we ended the third -- the first quarter, a major retailer had reduced their inventory and at that point, we viewed it as temporary. As we’ve gone into the second quarter, we’ve learned, it is in fact more of a systemic change and they intend to use their new replenishment systems to manage their inventory more tightly going forward to pursue inventory turns. And so we reflected that in our guidance going forward. But we feel really good about this business. Those kinds of adjustments aside, we continue to gain space. We will gain more space in the second half of the year. Our share positions are growing and our innovations working. So, we feel very good about the basics business and its impact on Innerwear.”
“As we look at intimates, as Rich touched on as well. We gained share there as well in the core intimates business, but this category has accelerated decline quite dramatically and declined at a high single-digit rate in the most recent 12 month period.”
“So in addition, as we look at our business and addition to the category weakness, our results in the quarter were impacted as we executed the last of our brand transition strategy and department stores. We set about focusing on fewer bigger brands, our important brands in the channel and folding smaller brands like Barely There into those brands.”
Despite the fact that Hanes has made several recent acquisitions, including Maidenform in 2013, DB Apparel in 2014 and Knights Apparel, announced earlier this year, chairman Noll has insisted in recent years that acquisitions continue to be an important part of his growth strategy.
And he repeatedly emphasized his interest in buying other companies during the most recent conference call, noting here, for example, that even planned share repurchases would not get in the way. “Do not read, absolutely do not read anything about share repurchases as being part of the mix as a negative about acquisitions. We are still absolutely focused on acquisitions, doing acquisitions and not changing the time frames in which we’re thinking about acquisitions. No ifs, ands or buts, we can do both.”
The complete conference call transcript can be found here: http://seekingalpha.com/article/3379745-hanesbrands-hbi-ceo-rich-noll-on-q2-2015-results-earnings-call-transcript
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