Hanesbrands Q2 net sales up 2 percent

REPORT_ Hanesbrands reported significantly higher

second-quarter 2013 earnings and margins on 2 percent net sales growth. For the quarter ended June 29, 2013, net sales increased 2 percent to 1.2 billion dollars, operating profit increased 51 percent to 181.4 million dollars, and diluted earnings per share increased 78 percent to 1.19 dollars from 0.67 dollars a year ago.

While the sales increase reflected a soft retail sales environment, gross and operating margins were strong, each up by approximately 500 basis points. Operating margins increased in each of the company’s four business segments with activewear achieving record double-digit margins for the second quarter and the first half.

Based on year-to-date results and the economic environment, Hanesbrands has increased its 2013 guidance for EPS, operating profit and free cash flow, while slightly lowering expectations for sales. The company’s new full-year guidance anticipates net sales of approximately 4.55 billion dollars; operating profit of 550 million dollars to 575 million dollars; EPS of 3.50 dollars to 3.65 dollars; and free cash flow of 450 million dollars to 550 million dollars.

“We achieved record profit margins and EPS in the second quarter with each business segment achieving improved profitability,” said Winston-Salem based Hanesbrands Chairman and CEO Richard A. Noll, adding, “Our Innovate-to-Elevate platforms continue to excel and are quickly delivering results for us and our retail partners. We are on solid footing to continue to deliver value for consumers, retailers and investors. We have moved into the low end of our target range for sustained operating profitability sooner than anticipated, and our cash flow and solid balance sheet have allowed us to begin paying quarterly dividends and agree to acquire Maidenform Brands.”

Despite the continued soft retail environment, innerwear net sales increased 3 percent and operating profit increased 23 percent for the second quarter. New products continued to perform well. Innerwear operating margin increased to 22 percent in the second quarter and was 21 percent for the first half. Both basics (socks and underwear) and intimates (bras, panties, shapewear and hosiery) achieved margin expansion in the half. The segment’s net sales increase was driven by strong sales of socks and men’s underwear, each of which increased by double digits and achieved strong margin expansion. For intimates, hosiery sales increased while bra and panty sales declined.

The segment delivered record profitability with an operating margin of 12.6 percent for the second quarter and 10.4 percent for the first half. Each of the segment’s categories – retail activewear, branded printwear and gear for sports – achieved double-digit operating margins in the second quarter. International segment net sales decreased 1 percent in the second quarter as a result of unfavorable currency exchange rates, while operating profit increased 7 percent and the operating margin was 10.2 percent. On a constant currency basis, net sales increased 5 percent and operating profit increased 18 percent in the second quarter.