(Filed Under Financial and General Interest News). HanesBrands Innerwear segment sales declined 3.5%, while segment operating profit fell 8.1% in the third quarter. For the company as a whole, however, total sales rose 1.0% and net income jumped 9.5% in the three months ended September 28, 2019.
Innerwear “sales were modestly below our expectations, driven by the impact of softer than expected retail traffic trends on our basics business,” explained CEO Gerald Evans in the conference call with analysts to discuss the quarter. “Despite the challenging environment, over the past year, our basic shares have remained stable, while our Comfort Flex Fit and X-Temp innovations continue to expand. Our intimates business performed in line with our expectations for the quarter. Shapewear delivered its fifth consecutive quarter of sales growth, and we saw early signs of success with our bra innovations positioning our intimates business for improved revenue trends in the coming quarter.”
Evans added, “Looking to the fourth quarter for total U.S. Innerwear, we expect sequentially improving revenue trends and strong margin improvement as we benefit from our brand investments in innovation. We anniversary a large retailer bankruptcy and we benefit from our price increases as commodity pressures have peaked.”
Providing more details on the Innerwear segment, CFO Barry Hytinen noted in the call, “For the quarter, Basics revenue declined 2%, while Intimates was down in line with our expectations. Innerwear’s operating margin of 21% was down 110 basis points compared to prior year, due to volume mix and increased investments to support our Intimates business. And as previously discussed, higher commodity costs in the quarter were offset by pricing. With respect to our segments, the midpoint of our fourth quarter revenue guidance assumes a decline of approximately 2% in our U.S. Innerwear segment. This outlook reflects improving sequential trends including the anniversary of the Sears bankruptcy.”
During the call, CEO Evans revealed “our Bras N Things business also continued its strong performance with growth in Australia, New Zealand and South Africa.” In early 2018 Hanes acquired the retailer, which at the time had 170 shops in those countries, generating sales of approximately $180 million in Australian dollars (about $144 million).
Evans also spoke about growth in other parts the company’s international Innerwear business, noting it was “up mid single-digit. And if I dig down more on that Innerwear business in total, there is growth across a number of geographies. The Hanes brand delivered nice growth across Mexico, Japan, Canada, and Philippines.” He added that the Bonds brand also “grew nicely” in Australia and New Zealand. That label was part of Pacific Brands Limited, which Hanes acquired in 2016.
In the third quarter, Hanes’ Innerwear segment generated an operating profit of $121.5 million on sales of $578.5 million, compared to an operating profit of $132.2 million on sales of $599.7 million in the three months ended September 29, 2018.
Total company net income for the third quarter was $187.8 million on sales of $1.87 billion compared to net income of $171.4 million on sales of $1.85 billion in the same period last year. — NM
The complete conference call transcript can be found here: https://seekingalpha.com/article/4300991-hanesbrands-inc-hbi-ceo-gerald-evans-q3-2019-results-earnings-call-transcript
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