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Hanesbrands Q3 net sales increase 17 percent

By Prachi Singh

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REPORT_ Hanesbrands announced strong third-quarter financial results driven by acquisition benefits, innovation, and enhanced profitability from global supply chain efficiency gains. The company raised its full-year adjusted EPS guidance forthe third time this year based on quarterly results. For the third quarter ended September 27, 2014, net sales increased 17 percent to 1.40 billion dollars.

“Our business continues to perform very well, particularly in an uncertain consumer environment,” Hanes Chairman and Chief Executive Officer Richard A. Noll said, adding, “We have delivered more earnings in the first three quarters of 2014 than we did all of last year. Our Innovate-to-Elevate strategy, global self-owned supply chain, and acquisitions continue to generate shareholder value and give us confidence in our potential for many years to come.”

Adjusted operating profit excluding actions increased 23 percent to 217 million dollars, and adjusted diluted EPS excluding actions increased 41 percent to 1.73 dollars. On a GAAP basis, operating profit declined 13 percent to 154 million dollars, and diluted EPS decreased 6 percent to 1.16 dollars.

The company’s updated 2014 full-year financial guidance includes an increase in expected adjusted EPS to a range of 5.55 dollars to 5.65 dollars, up from a previous guidance of 5.40 dollars to 5.60 dollars. The company continues to expect net sales of approximately 5.350 billion dollars to 5.375 billion dollars.

Net sales increased for each business segment. Maidenform contributed 115 million dollars in the third quarter, and DBApparel contributed 81 million dollars. Excluding the acquisition contributions, net sales on a constant currency basis increased 1 percent versus the year-ago quarter. Strong global supply chain performance and Innovate-to-Elevate drove a 100-basis-point improvement in adjusted operating profit margin year-over-year in the third quarter, excluding DBApparel. Overall, including DBA, adjusted operating margin increased 70 basis points.

Hanes completed the integration of Maidenform within one year of the acquisition closing. From here on, Maidenform brand results will be part of the company’s core business in its innerwear, international and direct to consumer segments. Hanes closed on the acquisition of DBApparel, a leading marketer of intimate apparel and underwear in Europe, from Sun Capital Partners, on August 29, 2014. The company expects the acquisition and synergies to add approximately one dollar of annual adjusted EPS within three to four years.

Innerwear net sales increased 16 percent in the third quarter as a result of the Maidenform acquisition, while the company’s base business was up slightly compared with a year ago. Operating profit increased 29 percent on acquisition benefits and increased base-business profitability. Activewear sales increased 5 percent, while operating profit declined one percent versus a strong year-ago third quarter.

The acquisitions of Maidenform and DBApparel contributed to international sales growth of 63 percent and operating profit growth of 74 percent in the third quarter, while foreign exchange rates on currency continued to have a negative impact on both measures. On a constant-currency basis, base international net sales decreased 3 percent in the quarter and operating profit decreased one percent. Net sales for the Direct to Consumer segment increased 13 percent and operating profit increased 6 percent in the third quarter, with the acquisition of Maidenform contributing to both comparisons versus the year-ago quarter.

Based on third-quarter results, Hanes has increased its 2014 outlook for full-year adjusted EPS and other financial measures. The company’s previous guidance for the 53-week year was updated September 3, 2014, at the time the DBApparel acquisition completion was announced. Hanes’ guidance range for net sales remains approximately 5.350 billion dollars to 5.375 billion dollars. The company has increased guidance for adjusted operating profit to a range of 750 million dollars to 770 million dollars, up from the previous guidance range of 735 million dollars to 755 million dollars. The new full-year guidance implies fourth-quarter guidance of approximately 1.55 billion dollars to 1.57 billion dollars in net sales; a range of 187 million dollars to 207 million dollars for adjusted operating profit; and a range of approximately 1.35 dollars to 1.45 dollars for adjusted EPS.

HanesBrands