Hanesbrands (HBI) Q4 Earnings Meet Estimates, Sales Down Y/Y

Hanesbrands Inc. (NYSE:HBI) reported its fourth-quarter 2019 results, with the bottom line improving year over year and meeting the Zacks Consensus Estimate. However, the company’s net sales declined year over year.

Q4 in Details

The company posted adjusted earnings of 51 cents a share,in line with the Zacks Consensus Estimate. Notably, earnings improved 13% from the year-ago quarter’s reported figure.

Net sales inched down around 1% to $1,751 million. The Zacks Consensus Estimate was pegged at $1,748 million. However, organic sales at constant currency (cc) were up slightly.

Sales in domestic Champion and international Champion surged 22% in the fourth quarter. In its international segment, sales rose across all regions including Europe, Asia and Australia.

Also, consumer-directed sales (including retail and online networks) rose 17% at cc and contributed 30% to total sales in the fourth quarter.

Moving on, adjusted operating profit inched up1.6% to $263 million. Also, adjusted operating profit margin increased 40 basis points (bps) to15%.

Segment Details

Innerwear: Sales in the segment declined 4.1% to $569.6 million due to earlier-than-anticipated disruption from ongoing store resets, which impacted innerwear basics. Also, sales of innerwear intimates were down during the quarter. Nevertheless, operating profit increased 4.7% to $140.4 million.

Activewear: Sales fell 6.7% to $453 million due to decline in C9 Champion program. Operating profit fell 8.2% to $71.6 million, thanks to increased SG&A expenses.

International: Sales in this segment rose6.9% to $650.8 million (up 10% at cc). The uptick was driven by sturdy sales in innerwear and activewear units. Operating profit inthe International segment declined 1.8% to $96.8 million in the quarter.

Other: Sales dropped2.7% to $77.6 million. The segment posted an operating profit of $8.4 million, up 17.3% year over year.

Other Financial Details

Hanesbrands ended the quarter with cash and cash equivalents of $328.9 million, long-term debt of $3,256.9 million and stockholders’ equity of $1,236.6 million.

During the quarter, the company generated net cash from operations of $558.7 million and incurred capital expenditures of $21.1 million.

Guidance

Management issued guidance for the first quarterof 2020. For the quarter, it anticipates the top line in the range of $1.466-$1.496 billion. The midpoint of guidance suggests a decline of 7% from the year-ago quarter’s figure. Adverse currency fluctuations are expected to hurt net sales by approximately $14 million compared with first-quarter 2019. Adjusted operating profit is expected in the band of $145-$155 million. The midpoint suggests a decline of 12% compared with the prior-year quarter’s figure. Moreover, the company projects adjusted earnings in the range of 23-26 cents per share, a midpoint decline of nearly 7% from 2019.

For 2020, net sales are expected in the range of $6.675-$6.775 billion. Adverse currency fluctuations are expected to lower net sales by about $25 million for the full year. Adjusted operating profit is forecasted in the band of $900-$930 million. Further, the company envisions adjusted earnings in the range of $1.72-$1.80 for the year.

At the mid-point, the current guidance for 2020 indicates year-over-year growth of 3% in net sales, 7% in adjusted operating profit. Further, the guidance represents mid-point growth of 15% for adjusted earnings.

Price Performance

Shares of this Zacks Rank #4 (Sell) company have declined 16.2% in the past year against the industry’s growth of 8.2%.

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