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HanesBrands reports 13 percent rise in Q2 net sales

By Prachi Singh

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HanesBrands said that its second quarter results were driven by continued acquisition benefits, global supply chain performance and margin expansion. Net sales increased 13 percent to 1.52 billion dollars in the quarter ended July 4, 2015, while adjusted operating profit excluding actions increased 15 percent to 265 million dollars and adjusted EPS excluding actions increased 16 percent to 0.50 dollar.

On a GAAP basis, operating profit decreased 33 percent to 139 million dollars and EPS decreased 39 percent to 0.23 dollar. Net sales in the quarter, excluding foreign currency fluctuations and the acquisitions of DBApparel and Knights Apparel, increased 1 percent. The company drove significant margin expansion in its innerwear and activewear segments.

“We continue to deliver double-digit growth in adjusted operating profit and EPS as expected, and we are tracking to our full-year profit expectations,” Hanes Chairman and Chief Executive Officer Richard A. Noll said, adding, “The integrations of our DBApparel and Knights Apparel acquisitions are proceeding on plan, and we continue to reap benefits from the past acquisitions of Gear for Sports and Maidenform.”

For 2015, Hanes has updated its full-year guidance for net sales. The company now expects full-year net sales of slightly less than 5.9 billion dollars, expects adjusted operating profit of 855 million dollars to 875 million dollars, and continues to expect adjusted EPS of 1.61 dollars to 1.66 dollars. The company’s 2015 guidance represents growth over 2014 results of nearly 11 percent for net sales, 12 percent to 15 percent for adjusted operating profit, and 13 percent to 17 percent for adjusted EPS.

Sales growth in the second quarter was driven by activewear and acquisitions of DBApparel and Knights Apparel. Activewear net sales increased 19 percent, driven by high-single-digit growth of Champion as well as 37 million dollars in net sales from Knights Apparel, a licensed apparel leader that was acquired April 6, 2015. In the International segment, DBApparel, a leading marketer of intimate apparel and underwear in Europe that was acquired August 29, 2014, contributed net sales of 149 million dollars.

The company’s adjusted operating profit margin increased 20 basis points in the second quarter to 17.4 percent. Innerwear and activewear operating profit margins increased by 190 basis points and 130 basis points, respectively. Contributors included strong supply chain performance, Innovate-to-Elevate benefits, and performance associated with the previous acquisitions of Gear for Sports and Maidenform.

Innerwear net sales decreased 1 percent in the second quarter, while operating profit increased 7 percent. Sales of basics, including underwear and socks, increased while intimate apparel sales decreased. The consumer sales environment remains uneven. Activewear net sales increased 19 percent and operating profit increased 30 percent, each led by Champion, Gear for Sports and the acquisition of Knights Apparel. The company has announced that it will integrate its Gear for Sports and Knights Apparel businesses into combined licensed sports apparel commercial business in the activewear segment to take advantage of complementary expertise in brand building, marketing, graphic design, licensing relationships, supply chain and retailer relationships across channels.

International sales and operating profit increased significantly as a result of the acquisition of DBApparel in Europe and strong results in Japan. DBApparel outperformed company expectations in the first half and is expected to outperform initial full-year expectations.

HanesBrands