HanesBrands witnesses poor Q4 but reports 8 percent jump in FY15 net sales

HanesBrands managed to report a third consecutive year of record net sales, adjusted operating profit and adjusted diluted earnings per share. Net sales increased 8 percent to 5.73 billion dollars for the year ended January 2, 2016, while 2015 core sales in constant currency were essentially flat to the prior year. However, fourth-quarter net sales decreased 7 percent, while core sales in constant currency decreased 5 percent.

“We delivered our third consecutive record year in 2015, although we are disappointed with our fourth-quarter performance,” Hanes Chairman and Chief Executive Officer Richard A. Noll said, adding, “For 2016, I feel confident in our growth expectations and outlook for a fourth consecutive year with a double-digit increase in adjusted EPS.”

Operating profit and earnings witness growth

Adjusted operating profit excluding actions for the year increased 13 percent to 861 million dollars and increased 6 percent in the fourth quarter. Adjusted EPS excluding actions for the year increased 17 percent to 1.66 dollars and increased 22 percent in the fourth quarter to 0.44 dollar. On a GAAP basis, operating profit increased 6 percent for the year to 595 million dollars and increased 20 percent for the fourth quarter, while EPS increased 7 percent for the year to 1.06 dollars and increased 36 percent for the fourth quarter to 0.30 dollar.

The company 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.

Segment performance in Q4 and FY15

Core sales in constant currency for 2015 were comparable to 2014 levels, with Innerwear core sales down 1 percent and Activewear core sales down 1 percent. For the fourth quarter, net sales and core sales for both Innerwear and Activewear decreased as domestic retail traffic declined significantly as historic warm weather enveloped the eastern two-thirds of the United States in November and December. Innerwear core sales in the fourth quarter decreased 2 percent, while Activewear core sales in the quarter decreased 12 percent.

However, in addition to adjusted operating profit growth, adjusted operating profit margins increased 180 basis points in the fourth quarter and 70 basis points to 15.0 percent of sales for the full year. On a GAAP basis, operating profit margin for 2015 was 10.4 percent.

2016 financial guidance

For 2016, Hanes expects another year of double-digit earnings growth. Guidance for adjusted EPS is 1.85 dollars to 1.91 dollars, or expected growth of 11 percent to 15 percent. Net sales are expected to be 5.8 billion dollars to 5.9 billion dollars, up 1 percent to 3 percent, and expectations for adjusted operating profit of 920 million dollars to 950 million dollars would be an increase of 7 percent to 10 percent.

The company’s sales initiatives include continued growth and space expansion for Innovate-to-Elevate platforms; such as Hanes and Champion X-Temp; application of Innovate-to-Elevate and marketing programs for core products; omni-channel programs, and Champion product enhancements.