DFBG Centric Brands (delisted)

Hanesbrands Inc. (HBI) reported fourth quarter 2012 earnings per share of $1.07, which was more than double than the prior year quarter earnings on the back of strong sales. The adjusted earnings excluded bond prepayment expenses of 30 cents per share. Earnings beat the Zacks Consensus Estimate of $1.00 per share.

For the full year 2012, earnings per share went up 7% to $2.62, driven by strong performance of the innerwear segment. Full year earnings also beat the Zacks Consensus Estimate of $2.54. Operating profit went up 18%.

Revenues and Operating Profits

Quarterly revenues were up 5% to $1.15 billion, driven by sales growth in both Innerwear and Outerwear segments. Revenues surpassed the Zacks Consensus Estimate of $997 million.

The gross profit surged 21.3% year over year to $398.1 million but gross profit margin shrank 470 basis points to 34.5% in the fourth quarter. The increase in gross profit dollars resulted from positive pricing and shutdown of underperforming businesses.

Operating profit in the quarter more than doubled to $153.0 million, driven by lower selling, general and administrative expenses. Operating profit margin expanded 660 basis points to 13.4%.

Segment Details

Innerwear Segment: Net revenue for the Innerwear segment increased 6.6% year over year to $585.7 million in the reported quarter. The increase came on the back of new and successful product innovation and decent performance of men’s underwear and women’s panties.

The company introduced new products like Hanes and Champion men’s underwear, Hanes panties and Bali bras which helped it to gain shelf space. Operating profit in the segment shot up 79.6% year on year to $127.0 million.

Outerwear segment: Outerwear segment sales climbed 5.8% from the year-ago period to $337.0 million, driven by strong sales of Hanes branded products, including T-shirts, fleece and graphic apparel, as well as Champion branded products. Results were partially impacted by the decline in branded printwear sales, which the company is the process of phasing out. Outerwear segment operating profit more than doubled to $37.0 million during the quarter.

International segment: Net sales in the International segment inched up 0.8% to $136.6 million in the quarter. Foreign exchange headwinds primarily hurt the segment results. Excluding currency, revenues in this segment increased 3% in the quarter. Operating profit, however, jumped 14.2% to $12.26 million in this segment.

Direct to Consumer segment: Direct to Consumer segment sales declined 3.7% to $94.0 million and operating profit increased 27.3% to $9.3         million in the quarter.

Other Financial Updates

The company exited the fourth quarter of 2012 with cash and cash equivalents of $42.8 million compared with $39.7 million in the previous quarter. Long-term debt was $1.3 billion compared with $1.5 billion in the fourth quarter of 2012. The company ended the year with $1.32 billion in long-term debt.

Guidance

For fiscal 2013, the company expects earnings $3.25 – $3.40 per share. The company expects net sales to be $4.6 billion. The company estimates net sales of branded printwear sales to decline by $40 million to $50 million, with around half the decline expected in the first quarter. Operating profit is expected to be between $500 million to $550 million. Free cash flow is expected to be approximately $350 million to $450 million.

Headquartered in Winston-Salem, North Carolina, Hanesbrands engages in the marketing of innerwear, outerwear and hosiery apparel and carries a Zacks Rank # 3 (Hold). Other companies in the same industry are Michael Kors Holding Limited (KORS), which has a Zacks Rank #1 (Strong Buy), Joe’s Jeans Inc. (JOEZ) and Ralph Lauren Corporation (RL), both of which have a Zacks Rank #2 (Buy)

 
HANESBRANDS INC (HBI): Free Stock Analysis Report
 
JOES JEANS INC (JOEZ): Free Stock Analysis Report
 
MICHAEL KORS (KORS): Free Stock Analysis Report
 
RALPH LAUREN CP (RL): Free Stock Analysis Report
 
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