Will Hanesbrands Stock Gain Post Pacific Brands Buyout?

Sportswear retailer Hanesbrands Inc. (NYSE:HBI) has completed the takeover of leading Australian underwear and intimate apparel company, Pacific Brands, for $800 billion on an enterprise value basis.

The Pacific Brands buyout has added two of the premiere Australian brands – Bonds (underwear, babywear and socks) and Berlei (activewear and lingerie) to Hanesbrands’ already rich portfolio of leading innerwear brands. These brands complement Hanesbrands’ Playtex intimate apparel and Champion activewear that it sells in Australia.

Pacific Brands will be headed by CEO David Bortolussi. The company currently operates through three business segments – Underwear, Sheridan, and Tontine & Dunlop Flooring. However, Hanesbrands intends to divest the non-core Tontine pillow business and Dunlop Flooring businesses. Pacific Brands sells to retailers and operates through 325 Bonds and Sheridan retail stores and retailer shop-in-shops.

Apart from Pacific Brands takeover, the company announced the completion of the Champion Europe acquisition. The buyout is the company’s attempt to fortify its presence in Europe. Champion Europe designs, sources and sells athletic apparel under its brand name to retailers and consumers through 130 outlets in Italy and Greece.

Hanesbrands recently raised its earnings and sales guidance for 2016 based on expectations of increased synergies acquisitions and debt refinancing.

The company now expects adjusted earnings for fiscal 2016 in the range of $1.89 to $1.95, up from the previous guidance of $1.85 to $1.91. The company has also raised its sales guidance to $6.15 billion to $6.25 billion from the previous $5.8 billion to $5.9 billion. The company expects operating profit in the range of $940 million to $975 million, up from $920 million to $950 million expected previously.

Hanesbrands makes strategic acquisitions to strengthen its portfolio. The buyouts provide the infrastructure, capability and systems to cater to a broad spectrum of retail customers, across the entire graphic apparel market.

In Apr 2015, Hanesbrands acquired collegiate apparel maker, Knights Apparel, to boost its licensed and graphic apparel business. The company expects to fully realize the synergies from the deal in 2016. The acquisition of underwear apparel chain, Maidenform Brands Inc., in Oct 2013, added popular brands like Flexees, Lilyette, Self Expressions and Sweet Nothings to the company’s portfolio.

Hanesbrands currently holds a Zacks Rank #2 (Buy). Other favorably ranked stocks in the textile/apparel sector are Perry Ellis International Inc. (NASDAQ:PERY) and PVH Corporation (NYSE:PVH) both carrying the same rank as Hanesbrands, Another stock in the consumer discretionary sector worth considering is Carter's Inc. (NYSE:CRI) sporting a Zacks Rank #1 (Strong Buy) .