Hanes Reports Second-Quarter Results, Discusses Discontinuation of Outer Banks and Private Label Business
HanesBrands, a leading marketer of everyday branded basic apparel from Winston-Salem, N.C., reported financial results for the second quarter ended June 30, 2012. In the quarter, the company announced exiting certain international and domestic imagewear businesses that are all now classified as discontinued operations. Unless otherwise noted, all financial results in this press release are GAAP measures for continuing operations.
In the quarter, net sales were $1.18 billion, an increase of 1 percent over last year's quarter, and earnings per diluted share were $0.67, a decrease of 14 percent. The decrease in EPS was primarily due to substantially higher cotton costs, although the Innerwear segment had 18 percent growth in operating profit on strong sales of men's underwear, children's underwear, and women's panties and bras.
With the majority of cotton inflation behind the company, Hanes expects solid results in the second half of 2012. The company's full-year guidance is for diluted EPS of $2.50 to $2.60; net sales of $4.52 billion to $4.57 billion, an increase of approximately 2 percent to 3 percent over last year; and free cash flow of $400 million to $500 million.
"Our business had a solid quarter, and we are performing slightly ahead of our plans for the year, especially in the Innerwear segment," Hanes Chairman and Chief Executive Officer Richard A. Noll said. "While we still have a long way to go, we are well positioned for the second half of the year."
In addition to providing its second-quarter financials, the company discussed its continuing plans to remove itself from the private label industry, as first reported by Promo Marketing in February.
On May 30, Hanes sold its European imagewear business, and the company is currently completing the discontinuation of its private-label and Outer Banks domestic imagewear operations serving wholesalers that sell to the screen-print industry. In accordance with GAAP requirements, the company reported results for the second quarter on a continuing-operations basis and revised prior-period results to reflect continuing operations. The company's branded printwear operations will continue to operate and serve the branded domestic screen-print market.
For the first half, discontinued operations had a loss per diluted share of $0.69—a loss of $0.03 in the first quarter and a loss of $0.66 in the second quarter. In February when the company issued financial guidance for 2012, the company's expectations for what are now discontinued operations were net sales of approximately $190 million, an operating loss of less than $1 million, and cash flow from operations of approximately $15 million.
The company has not yet revealed the buyer of its European imagewear business, nor what will happen with the Outer Banks brand. In a statement posted on Hanesbrands' website, the company said details on discontinued segments will be available in its 10-Q SEC filing for the second quarter. Promo Marketing will have more on this story as information becomes available.
For more information, visit www.hanesbrands.com.