Leading apparel retailer Hanesbrands Inc. (HBI) completed the takeover of Europe-based intimate apparel company DBApparel (DBA) on Aug 29, 2014 for €400 million or $528 million.
The acquisition is expected to be accretive to fiscal 2014 results and Hanesbrands raised fiscal 2014 guidance to reflect the impact of the takeover. Hanesbrands expects to start the integration of DBA immediately
For fiscal 2014, Hanesbrands expects net sales to be within $5.35 to $5.38 billion, up from approximately $5.08 billion as expected earlier. The company expects operating profit in the range of $735 to $755 million as against the previous guidance range of $710 to $730 million. Hanesbrands expects the DBA acquisition to also have a positive effect on the company’s corporate tax rate.
Hanesbrands has also raised its earnings guidance to a range of $5.40 to $5.60 from $5.20 to $5.40. The raised guidance reflects DBA’s contributions to sales, adjusted operating profit and the corporate tax rate, partially offset by higher interest expense.
Hanesbrands had announced its intention to takeover DBA in Jun 2014. The buyout is in accordance with Hanesbrands’ acquisition strategy as DBA sells intimate apparel — a core category of Hanesbrands. The takeover has opened the untapped market of Europe for Hanesbrands.
The merger between Hanesbrands and DBA has brought DBA’s popular brands like DIM (popular in several Western and Central European countries) and Hanesbrands’ market leading brands like Playtex, Bali, Just My Size, Hanes, Barely There, Wonderbra, Champion and L’eggs under one banner. Strong national brands like NürDie hosiery in Germany, Lovable intimate apparel in Italy and Abanderado men’s underwear in Spain will also be added to Hanesbrands’ portfolio.
Hanesbrands expects the DBA acquisition to be accretive to fiscal 2014 earnings and add approximately $1.00 annually by 2018. Moreover, the upcoming year-end holiday season extending from September through December is seasonally the strongest period for DBA, generating almost one-third of its annual revenues and half of its profits.
The takeover of DBA comes within a year of Hanesbrands’ buyout of the underwear apparel chain, Maidenform Brands Inc. in Oct 2013. The acquisition boosted one of its core categories, intimate apparel, with the addition of popular brands like Flexees, Lilyette, Self Expressions and Sweet Nothings.
Hanesbrands sports a Zacks Rank #1 (Strong Buy). The company is on a roll with two back-to-back acquisitions in the past one year. The DBA acquisition was preceded by the buyout of underwear apparel chain, Maidenform Brands Inc. in Oct 2013. These frequent strategic takeovers will bolster its presence in the global intimate apparel and hosiery category.
Other stocks to consider in the apparel industry include Crocs, Inc. (CROX), Perry Ellis International Inc. (PERY) and Michael Kors Holding Limited (KORS). All these stocks carry a Zacks Rank #2 (Buy).
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