Hanesbrands Inc. Reports Third-quarter 2015 Financial Results
Hanesbrands Inc., Winston-Salem, N.C., recently reported record third-quarter results, including double-digit growth for net sales, adjusted operating profit and adjusted earnings-per-share (EPS).
The seventh consecutive quarter of record results was driven by continued acquisition benefits, global supply chain performance, and core sales and margin growth in the innerwear and activewear segments.
Net sales increased 14 percent to $1.59 billion in the quarter ended Oct. 3, 2015. Core sales, which exclude acquisitions and a retailer exit from Canada, increased 3 percent in constant currency.
Adjusted operating profit, excluding actions, increased 16 percent to $251 million, and adjusted EPS, excluding actions, increased 16 percent to $0.50. On a GAAP basis, operating profit increased 35 percent to $208 million and EPS increased 38 percent to $0.40.
Hanesbrands Inc. also expanded its strategic use of cash flow in the quarter by beginning to repurchase company stock in the open market. In the third quarter, the company purchased 10.7 million shares for approximately $311 million.
“We had another great quarter of double-digit growth that reflects our continued value-creation potential,” said Richard A. Noll, chairman and CEO of Hanesbrands Inc. “We again have increased our operating profit and EPS guidance as we continue to drive growth and margin improvement through innovation and acquisition integration. We also reached another milestone in our strategic use of cash flow with the resumption of share buybacks.”
For 2015, Hanesbrands Inc. has updated its full-year guidance, including increased expectations for adjusted operating profit and adjusted EPS. The company now expects full-year net sales of approximately $5.85 billion, adjusted operating profit of $880 million to $890 million, and adjusted EPS of $1.66 to $1.68.
Key financial accomplishments for the third quarter of 2015 include:
- Core-sales growth. Innerwear sales increased 3 percent, and activewear sales, excluding acquisition benefits, increased 2 percent. In constant currency, total company core net sales increased 3 percent, excluding acquisitions and the exit of a retailer from Canada.
- Significant adjusted operating profit and margin growth. The company’s adjusted operating profit margin increased 30 basis points in the third quarter to 15.8 percent. Innerwear and activewear operating profit margins increased by 40 basis points and 230 basis points, respectively, as a result of strong supply-chain performance and Innovate-to-Elevate benefits.
- Acquisitions contribute to results and integrations on plan. The April 2015 acquisition of Knights Apparel, a licensed apparel marketer, added net sales of $84 million to activewear results in the third quarter. In the international segment, DBApparel, a marketer of intimate apparel and underwear in Europe that was acquired Aug. 29, 2014, contributed net sales of $179 million (€161 million) in the third quarter. The integration of DBApparel is underway following the completion of consultations with appropriate works councils and unions, while implementation of the Knights Apparel integration plan will begin late in the fourth quarter of 2015.
Key business segment highlights for the quarter include:
- Innerwear net sales increased 3 percent in the third quarter, and operating profit increased 5 percent. Sales of intimates rebounded with high-single-digit growth on strength in bras and shapewear. Sales of basics were up slightly versus the year-ago quarter, despite the expected inventory adjustment of a major retailer that was discussed with second-quarter results.
- Activewear results in the quarter were strong with net sales growth of 22 percent and operating profit growth of 39 percent driven by double-digit Champion growth and the acquisition of Knights Apparel. Core sales, which exclude acquisitions, increased 2 percent with growth of more than 30 percent for Champion in the department store, mid-tier and sporting goods channels.
- International sales and operating profit increased significantly, despite negative foreign currency impacts, as a result of the acquisition of DBApparel in Europe and strong results in Japan.
All adjusted consolidated measures and comparisons exclude approximately $43 million and $63 million of pretax charges related to acquisitions and other actions in the third quarters of 2015 and 2014, respectively.
Through the third quarter of 2015, Hanes incurred approximately $212 million in pretax charges related to acquisitions, primarily DBApparel and Knights Apparel, and other actions. In the comparable period in 2014, the company incurred approximately $130 million in pretax charges related to acquisitions, primarily Maidenform and DBApparel, and other actions.
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