Hanesbrands raises full year guidance on completion of DBA acquisition

REPORT_ Hanesbrands has completed the acquisition of DB Apparel, a leading

marketer of intimate apparel, hosiery and underwear in Europe, for 400 million euros or about 528 million dollars. Hanes’ new guidance range for net sales is now approximately 5.350 billion dollars to 5.375 billion dollars, up from previous guidance of approximately 5.075 billion dollars. The company increased guidance for adjusted operating profit by 25 million dollars to a range of 735 million dollars to 755 million dollars, up from the previous guidance range of 710 million dollars to 730 million dollars.

“We are delighted and proud to welcome DBA’s 6,200 employees into the Hanes family, a combination that creates significant growth and margin-expansion opportunities by leveraging strong brands, leading market positions, disciplined innovation, and the best apparel supply chain in the industry,” opined Hanes Chairman and Chief Executive Officer Richard A. Noll, adding, “DBA will immediately contribute to our financial results, and the purchase price of approximately 7½ times EBITDA represents an excellent use of our free cash flow to generate significant shareholder value.”

The acquisition of DBA from Sun Capital Partners, is expected to add approximately 1 dollar of adjusted EPS within three to four years. The year-end holiday season is DBA’s strongest earnings period with September through December typically generating approximately a third of annual sales but approximately half of annual operating profit. Hanes expects to benefit in 2014 by only incurring one-third of a year’s interest expense for financing the DBA acquisition while gaining a larger proportion of annualized profit performance during the seasonally strong holiday period.

Adjusted EPS guidance for 2014 has been increased by 0.20 dollars to a range of 5.40 dollars to 5.60 dollars, up from previous guidance of 5.20 dollars to 5.40 dollars, reflecting the DBA contributions to sales, adjusted operating profit and the corporate tax rate, partially offset by higher interest expense. Hanes had also raised its full-year earnings guidance twice previously in 2014. Most recently, the company raised EPS guidance in conjunction with reporting second-quarter financial results on July 23, 2014, to reflect the margin-enhancing benefits of Hanes’ Innovate-to-Elevate strategy and strong efficiency performance of its self-owned global supply chain.

The purchase of DBA is Hanes’ second major acquisition in its core innerwear categories in the past year, making it one of the largest innerwear companies in the world. Maidenform, a seller of bras, shapewear and panties primarily in the United States under brands such as Maidenform and Flexees, was acquired Oct, 7, 2013. By contrast, DBApparel is a leading seller of bras, hosiery and underwear primarily in Europe under such strong European consumer brands as DIM, Playtex, and Wonderbra.

In Western and Central Europe where Hanes does not have a material presence, DBA is a leader with innerwear product offerings that mirror those of Hanes’ existing innerwear segment. DBA enjoys lead position in France and Spain followed by Italy. In men’s underwear and hosiery, the company leads in France and Spain and Germany. In addition to DIM, Playtex and Wonderbra, strong national brands include Nür Die hosiery in Germany, Lovable intimate apparel in Italy, and Abanderado men’s underwear in Spain.

Hanes and DBA were formerly sister companies under the ownership of Sara Lee Corporation. In 2006, Sun Capital acquired DBA and Hanes spun off into an independent public company. Now together, Hanes holds the worldwide apparel rights to the Playtex, Wonderbra and DIM brands.