Hanesbrands Inc.’s (HBI) fourth-quarter 2014 earnings per share of $1.49 beat the Zacks Consensus Estimate of $1.45 by 2.8% and shot up 49% from the prior-year quarter.
Profit was driven by strong sales and higher margins, backed by the success of the Hanesbrands’ Innovate-to-Elevate strategy. Innovate-to-Elevate focuses on value-added, higher-priced and higher-margin items that can be supplied at lower costs.
The adjusted earnings per share exclude pre-tax charges of $69 million related to the acquisitions of Maidenform Brands and DBApparel (DBA), as well as other initiatives.
Revenues and Operating Profits
Quarterly revenues gained 18% and came in at $1.52 billion, driven by more than high single-digit growth in all the segments. Sales marginally lagged the Zacks Consensus Estimate of $1.55 billion.
On a constant currency basis, net sales went up 19% versus the year-ago period. The DBA business — acquired in Aug 2014 — contributed $291 million to total sales. The business is currently being integrated into Hanesbrands.
DBA is a Europe-based intimate apparel company which is expected to be accretive to fiscal 2015 results. The buyout is in accordance with Hanesbrands’ acquisition strategy as DBA sells intimate apparel — one of its core categories. The takeover has opened several opportunities in Europe for Hanesbrands.
The Maidenform acquisition, completed in fiscal 2013,has also been significantly pulling up its revenues. In fiscal 2014, Maidenform, which, has been fully integrated with Hanes, contributed almost $491 million to total 2014 sales.
Operating profit went up 31% to $200.0 million year over year. Operating margins increased 140 basis points to 14.3%.
Segment Details
Innerwear: Net revenue for the segment remained flat year over year at $699.7 million as softness in bras and hosiery offset the sales increase in the Basics business. Operating profit increased 18% driven by supply chain efficiencies and synergies from the Maidenform takeover.
Activewear: Sales in this segment went up 10% from the year-ago period to $372.9 million on the back of strong performance by almost all its categories. Operating profit increased 10%, driven by lower markdowns offered by the company during the quarter.
International: This segment witnessed 149% surge in sales to $341.0 million despite the negative impact of foreign currency movements. On a constant currency basis, sales went up 157%. Operating profit skyrocketed 236%, driven by higher sales volumes.
Direct to Consumer: Sales in this segment went up 1% to $11.96 million backed by the Maidenform acquisition. Operating profit increased 29% driven by higher sales volumes.
Fiscal Year Results
For fiscal 2014, earnings per share of $5.66 missed the Zacks Consensus Estimate by a penny. Earnings, however increased 45% from the last year.
Net sales gained 15% and came in at $5.32 billion. However, sales marginally lagged the Zacks Consensus Estimate of $5.36 billion.
Other Financial Updates
Hanes has approved a 4-for-1 stock split which will be executed through a stock dividend to be issued to stockholders as of Mar 3, 2015.
Fiscal 2015 Guidance Issued
Hanesbrands expects negative currency effects to continue into fiscal 2015. The company expects net sales in the range of $5.775 to $5.825 billion, up 9% from fiscal 2014. Operating profit is expected in the range of $835 to $855 million, up 9% to 12% from fiscal 2014. Pre-split earnings per share are expected to range within $6.30 to $6.50, up 11% to 15% from fiscal 2014. The guidance is in line with Zacks Consensus Estimate.
Hanesbrands has a Zacks Rank #3 (Hold). Some stocks in the same sector that are performing well include GIII Apparel (GIII), Lululemon Athletica Inc. (LULU) and Crocs Inc. (CROX). All the stocks carry Zacks Rank #2 (Buy).
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