(Filed Under Financial and General Interest News). Hanesbrands innerwear sales fell 2.5% in the quarter ended July1, dropping to $719.0 million from $737.7 million last year. For the first half, sales for the division were down 4.0%, to $1.224 billion from $1.275 billion in the six months ended July 2, 2016.

For the company as a whole in the latest three months, sales were up 11.8% and net income was up 34.6%. In addition to innerwear, Hanes’ business segments include activewear, international and “other.”

Operating profit for the innerwear division declined in the second quarter to $164.3 million, down 7.7% from $178.0 million earned in the quarter ended July 2, 2016. In the first half, operating profit for the innerwear division fell to $267.0 million, down 7.2% from $287.8 million last year.

Hanes pointed to “sequential improvement” for innerwear noting that “year-over-year segment sales decreased less than 3 percent in the second quarter, compared with lower sales of 6 percent in the first quarter 2017 and 8 percent in the fourth quarter 2016. There was sequential improvement for both the basics and intimates businesses.” It added that “operating profit declined 8 percent as a result of lower sales” and expenses related to a business improvement program they call Project Booster.

The company also reported “Activewear sales increased 1 percent. Acquisition benefits and sales growth for Hanes retail and the online channel were partially offset by the later-than-expected licensed sports apparel shipments and the effect of retailer bankruptcies. Operating profit decreased 10 percent.”

In the conference call with analysts to discuss the results, CEO Gerald Evans Jr. explained “For the quarter, we saw continued progress in our innerwear trends as we gain additional share in basics and we pass the initial impact from door closings. Our Innerwear business remains on track to return to growth in the second half, driven by stabilizing shelf space in our intimates business and continued momentum in our basics business behind our FreshIQ innovation.”

CFO Richard Moss added, “Point of sale trends remained steady during the quarter, while performance was mixed by retailer and channel. In our basics business, we gained share in the quarter driven by men’s underwear as well as strong gains in both socks and kids’ underwear. In intimates, shipments improved sequentially as we saw improving broad trends at certain key retailers. With respect to Innerwear’s operating margins, the decline versus last year was driven by the combination of lower sales and Project Booster related expenses. And as we look to the second half, we expect operating margins to expand driven by sales leverage and the expense savings from Project Booster.”

“Turning to our Activewear segment, sales increased roughly 1% over last year,” Evans continued, “as the addition of GTM [a sportswear firm acquired by Hanes last year] and the strength in our Hanes business more than offset the last of the impact from The Sports Authority bankruptcy and the late quarter timing shift in our sports apparel business. As we look to the second half, we expect an acceleration in Activewear’s growth driven by our Champion in sports apparel businesses. The operating margin decline versus last year in Activewear was driven by short-term acquisition related dilution as well as lower royalty revenues due to the bankruptcy of a licensee [Payless ShoeSource].”

“So, to wrap up, the year is unfolding as expected. Trends are improving across our business, particularly within U.S. Innerwear.”

Looking ahead, for the company as a whole in 2017, Hanes stated it “expects net sales of $6.45 billion to $6.55 billion, GAAP operating profit of $845 million to $895 million” and “EPS for continuing operations of $1.70 to $1.82.” — NM

A full transcript of the conference call can be found here: https://seekingalpha.com/article/4093450-hanesbrands-hbi-q2-2017-results-earnings-call-transcript?page=1

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Published 08-03-2017 by Nick Monjo