Why Hanes Is Getting Crushed

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When Hanesbrands Inc. (NYSE: HNS) reported its most recent quarterly results before the markets opened on Wednesday, the apparel maker said that it had $0.45 in earnings per share (EPS) and $1.72 billion in revenue.

The consensus estimates from Thomson Reuters had called for $0.46 in EPS on revenue of $1.71 billion for the second quarter. In the same period of last year, it posted EPS of $0.53 and $1.65 billion in revenue.

In terms of its segments, the company reported:

  • U.S. Innerwear segment sales decreased 3 percent, while operating profit decreased 10 percent as a result of raw material inflation and mix of products sold.
  • U.S. Activewear segment sales increased 7 percent, including a 1.5 percent increase in organic sales fueled by growth of Champion and the licensed sports apparel business.
  • International segment sales increased 15 percent and operating profit increased 27 percent. In constant currency, sales increased 12 percent and operating profit increased 24 percent.

Looking ahead to the third quarter, the company expects to see net sales between $1.85 billion and $1.9 billion with EPS in the range of $0.54 to $0.57. The consensus estimates are $0.56 in EPS and $1.88 billion in revenue for the quarter.

Gerald W. Evans Jr., Hanes CEO, commented:

Our results for the second-quarter were consistent with our guidance and the year is unfolding as we expected. We achieved organic growth for the fourth consecutive quarter with strong International and global Champion sales growth. We continue to address the challenging environment for intimate apparel and expect our turn-around plan to gain additional traction by the end of the year. Our cash flow from operations of $64 million in the second quarter was ahead of our expectations and the outlook is strong. We continue to expect margin expansion in the second half, primarily driven by additional acquisition synergies and organic sales growth.

Shares of Hanesbrands were last seen down about 19% at $17.98 on Wednesday, with a consensus analyst price target of $22.71 and a 52-week target range of $16.38 to $25.73.