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Hanes Blames 7.4% Q4 Sales Drop On Weather

(Filed Under Financial and General Interest News). While Hanesbrands fourth quarter net income rose 33.2%, overall sales dropped 7.4% and “innerwear” sales dropped 5.9%. The company complained “domestic retail traffic declined significantly as historic warm weather enveloped the eastern two-thirds of the United States in November and December.”

For the fiscal year ended January 2, 2016, combined sales rose 7.6% to $5.732 billion while innerwear sales for the twelve months dropped 2.1% to $2.649 billion. Operating profit for the innerwear segment rose 7.1% to $601.5 million for the year and rose 6.0% to $157.9 million for the fourth quarter.

In a statement that accompanied the release of financial data, Hanes said “Acquisition benefits, margin expansion and cost control contributed to record net sales, adjusted operating profit and adjusted EPS for the year, despite lower-than-expected fourth-quarter performance. The company continued to reap synergy benefits in 2015 from its 2013 Maidenform acquisition, while the integrations of the company’s 2014 acquisition of DBApparel (Hanes Europe Innerwear) and 2015 acquisition of licensed apparel leader Knights Apparel are underway.”

Describing the fourth quarter falloff in sales, the company wrote, “Retail traffic declined by high-single-digit percentages in November and the first three weeks of December. The prolonged traffic declines weighed on point-of-sale trends and caused retailers to pull back on orders, impacting shipments for both replenishment Innerwear and cold-weather and replenishment Activewear. Improvement in retail traffic and Hanes’ point-of-sale sell-through in the latter third of December and into January was too late to influence fourth-quarter shipments.”

The company insisted that the declines in fourth quarter were only temporary. “For 2016, Hanes expects another year of double-digit earnings growth. Guidance for adjusted EPS is $1.85 to $1.91, or expected growth of 11 percent to 15 percent. Net sales are expected to be $5.8 billion to $5.9 billion, up 1 percent to 3 percent, and expectations for adjusted operating profit of $920 million to $950 million would be an increase of 7 percent to 10 percent.”

In the conference call to discuss the results with analysts, Hanes executives discussed the possibility of buying more companies. Said Noll, “Acquisitions is working great for us. There is no ifs, ands or buts. We’re doing well with Maidenform. We’re still seeing a little bit of the last synergies in 2016, Knights Apparel and Hanes Europe are working extremely well, both beat their plans in 2015, who are in full swing to reap acquisition synergy benefits and so, we feel really good about it. And we’ve now got the bandwidth to start looking for our next set of acquisitions, and it’s part of our strategy and will be part of our strategy, and feel really good about where we are.”

CFO Richard Moss added that a potential acquisition “would either be Innerwear or Activewear, both domestic and international. And I think over time you’ll see us have opportunities along all of those dimensions, both Innerwear, Activewear, domestic and international.”

Asked by analysts about the importance of online business, Noll emphasized, “it’s growing, it’s growing with our traditional retailers, it’s growing through our own efforts and we’re also working with pure-plays, and so it clearly needs to be a big area of focus.”

Asked about the possibility of shrinking the brick and mortar outlet portion of Hanes, CFO Moss responded, “The outlet business for us has always been there, we’re in most of the malls around the country, it’s a business that on the margin is a good business for us to be in. It’s never going to be a growth driver. In some cases as rents in some places have gone up, it doesn’t make sense for us to be there, and if the lease comes up, we’ll go ahead and exit from that particular mall. We look at everything on a four-wall profitability basis and as long as the thing’s making money, we’ll continue to keep the store, and if it’s not, we’ll let it wind down. But on the flip side, I want to reinforce, the online piece of that’s clearly a growth vehicle.”

A full transcript of the conference call can be found here:

more Financial and General Interest News >>

Published 02-08-2016 by Nick Monjo

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