HanesBrands Reports Solid Fiscal Fourth-Quarter, Full-Year In 2019 Financial Results
HanesBrands has released its full-year and fourth-quarter 2019 financial results, highlighting record net cash from operations of $803 million for the year and $559 million for fourth quarter. The company’s net cash performance was an increase of 25 percent for the full year. It also significantly reduced its debt by paying down $609 million in 2019. Winston-Salem, North Carolina-based HanesBrands participates in the promotional products industry as suppliers Hanes/Champion/ComfortWash (PPAI 191138, S10) and Alternative Apparel (PPAI 217134, S5).
For its fiscal fourth quarter, which ended December 28, 2019, net sales of $1.75 billion decreased one percent while constant-currency organic sales increased slightly. For the full year, net sales increased two percent to $6.97 billion and represented the second consecutive year of constant-currency organic sales growth. Fourth-quarter GAAP EPS and adjusted EPS excluding actions were each $0.51, increases of 24 percent and 13 percent, respectively. For the full year, GAAP EPS increased 11 percent to $1.64 and adjusted EPS excluding actions increased five percent to $1.76.
“HanesBrands delivered a solid fourth quarter right in line with our guidance and concluded a very successful year with record operating cash flow, significantly reduced debt, continued organic revenue growth and strong underlying business fundamentals,” says Hanes Chief Executive Officer Gerald W. Evans Jr. “Looking forward, we expect to create meaningful shareholder value using our strong balance sheet, stabilized innerwear profitability and Champion, international and consumer-directed growth. We view 2020 to be an inflection point for sales, profit and EPS growth rates that accelerate down the P&L.”
The strength of the Champion Brand, the international segment and consumer-directed business has driven 10 consecutive quarters of constant-currency organic net sales growth. In the fourth quarter, constant-currency organic sales increased slightly, while full-year constant-currency organic sales increased four percent. Global Champion sales, excluding C9 Champion in the U.S. mass channel, totaled $1.9 billion in constant currency in 2019, an increase of 40 percent over last year as a result of expanded product offerings and increased distribution. With balanced growth in the fourth quarter, Champion sales increased 22 percent both domestically and internationally.
Consumer-directed sales, which HanesBrands defines as all sales to consumers online or through brand stores, continue to increase and account for a larger portion of total sales. Consumer-directed sales in constant currency increased 17 percent in the fourth quarter and 16 percent for the full year. Consumer-directed sales in constant currency represented 30 percent of total sales in the quarter and 25 percent for the full year.
HanesBrands reports that its innerwear segment’s operating profit has increased despite lower sales. U.S. innerwear segment sales decreased four percent in the fourth quarter while operating profits increased five percent. Segment operating profit margin of 24.6 percent increased 210 basis points, benefiting from increased pricing and lower selling, general and administrative expenses. Sales of innerwear basics decreased five percent as a result of earlier-than-planned disruption from ongoing store resets in the mass channel that are expected to generate increased space and share beginning in the second half of 2020.
The company reports that, as it expected, activewear segment sales and profits were affected by program exits. U.S. activewear segment fourth-quarter sales decreased seven percent, slightly better than expected. Segment operating profit in the quarter decreased eight percent as a result of higher SG&A expenses. Champion sales, excluding C9 Champion in the mass channel, increased more than 14 percent in the quarter. C9 Champion sales decreased 26 percent as that program continued to wind down to conclusion in January 2020. Sales in the remainder of the activewear segment declined but performed better than expected.