Hanesbrands Inc.’s (HBI) first-quarter fiscal 2014 earnings per share of 76 cents shot up 49.0% from prior-year quarter. Earnings also beat the Zacks Consensus Estimate of 58 cents by 31.0%. Profit was driven by higher margins backed by the success of the ‘Innovate-to-Elevate’ strategy. Increased supply chain operating efficiencies, lower selling, general and administrative costs, and successful integration of Maidenform Brands also helped to boost profit during the quarter.
The strategy focuses on value-added, higher-priced and higher-margin items that can be supplied at lower costs.
Revenues and Operating Profits
Quarterly revenues gained 12.0% and came in at $1.06 billion driven by the strong performance of Activewear segment, especially Champion brand. Sales were, however, slightly behind the Zacks Consensus Estimate of $1.07 billion. The Maidenform acquisition, completed in fiscal 2013, contributed almost $125 million to total sales in the quarter.
Gross profit went up 13.5% year over year to $371.6 million in the first quarter, while gross profit margin inflated 50 basis points (bps) to 35.1% on the back of lower cost of sales.
Operating profit in the quarter went up 34.4% to $114.4 million from $85.1 million in the year-ago quarter. Operating profit margin inflated 180 bps to 10.8% backed by positive sales leverage.
Segment Details
Innerwear: Net revenue for the Innerwear segment climbed 14.9% year over year to $571.2 million in the reported quarter driven by double-digit growth in socks and panties.
Activewear: Activewear segment sales went up 10.2% from the year-ago period to $294.5 million, backed by strong performance of the Champion brand, and branded printwear and Gear for Sports businesses.
International: Net sales in the International segment went up 8.7% to $109.9 million in the quarter. Successful integration of Maidenform brand into the business boosted the segment’s revenues.
Direct to Consumer: Direct to Consumer segment’s sales went up 4.5% to $83.7 million backed by contributions from the Maidenform acquisition.
Other Financial Updates
The company exited the first quarter of 2013 with cash and cash equivalents of $151.3 million compared with $115.9 million in the previous quarter. Long-term debt was $1.6 billion in the quarter compared with $1.5 billion in the previous quarter.
Guidance
Following strong business momentum in the first quarter, Hanesbrands raised full-year fiscal 2014 outlook. For full-year 2014, the company expects business momentum to continue backed by the Innovate-to-Elevate strategy. Hanesbrands now expects earnings per share in the range of $4.80 to $5.00, higher up from $4.60 to $4.80 expected earlier. The company expects operating profits between $665 million and $685 million versus $640 million and $660 million. The company, however, maintained its sales guidance and expects net sales to be slightly less than $5.1 billion in fiscal 2014.
Hanesbrands expects to complete its integration of Maidenform operations by the end of the second quarter of fiscal 2014. The company expects Maidenform brand to contribute approximately $500 million to sales in 2014 and $30 million to operating profit.
Hanesbrands engages in the marketing of innerwear, outerwear and hosiery apparel and carries a Zacks Rank #2 (Buy). Other consumer staples sector that are performing well at the current level include Supervalu Inc. (SVU), Treehouse Foods Inc. (THS) and McCormick & Company, Incorporated (MKC). All the stocks have a Zacks Rank #2.
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