HanesBrands Reports Three Percent Net Sales Increase For Q2
HanesBrands has announced its second-quarter 2019 results, reporting that net sales, operating profit and earnings per diluted share achieved the high end of company guidance. For its fiscal second quarter, which ended June 29, net sales increased three percent to $1.76 billion, and in constant currency, net sales increased five percent, the eighth consecutive quarter of organic constant-currency sales growth. The Winston-Salem, North Carolina-based company’s Innerwear segment sales met expectations, Activewear segment sales increased more than 10 percent, as expected, and international sales growth of four percent exceeded expectations. Global sales of Champion brand activewear and innerwear increased more than 50 percent, excluding the U.S. mass channel. HanesBrands participates in the promotional products industry as suppliers Hanes/Champion/ComfortWash (PPAI 191138, S10) and Alternative Apparel (PPAI 217134, S5).
Second-quarter GAAP operating profit increased six percent to $234 million, while adjusted operating profit increased one percent to $247 million. GAAP diluted earnings per share of $0.42 increased eight percent, and adjusted EPS of $0.45 was the same as a year ago.
The company’s second-quarter results were on the high end of its guidance. The expectations for the second quarter were net sales of $1.735 billion to $1.765 billion; GAAP operating profit of $223 million to $233 million, with adjusted operating profit of $238 million to $248 million; and GAAP EPS of $0.40 to $0.42, with adjusted EPS of $0.43 to $0.45.
“Our successful growth strategies drove strong second-quarter results and first-half momentum, including outstanding Champion brand growth, very effective product innovation, international growth and continued consumer-direct sales growth,” says Hanes CEO Gerald W. Evans, Jr. “This momentum combined with our second-half plans and visibility gives us confidence in our ability to achieve full-year guidance at the midpoint or higher. Champion bookings remain strong, additional product innovation is planned, the outlook for international contributions remains positive and our operating margin is expanding. We are solidly on track to meet our cash flow and debt leverage goals.”
This was the eighth consecutive quarter of strong double-digit growth for the Champion brand globally, outside the mass channel. The company attributes this to sell-through strength at existing accounts, expanded wholesale distribution, increased consumer-direct sales, successful product offerings and channel segmentation. Champion’s growth in the second quarter was widespread across geographic regions, including North America, Europe, Asia and Australia. In China, the company’s retail partner is adding Champion branded stores, and the company has added a second retail partner to accelerate expansion of stores and online sales in 2020.
The company is also expanding existing innovation platforms into new product categories and geographies and is introducing new product innovation. Innerwear initiatives are underway or planned for the Hanes, Maidenform, Bali, DIM and Bonds brands. They include new product launches in bras, cooling innovation in shapewear, compression innovation in hosiery and the second-generation X-Temp cooling fabric. Champion is taking advantage of new graphic embellishment techniques and leveraging its heritage reverse-weave fabric innovation for new products, including the introduction of sports bras made with comfortable sweatshirt fabric. The Hanes, Alternative, Champion, Bonds and DIM brands have introduced innerwear or activewear products utilizing recycled yarns, recycled polyester, organic cotton or cellulose-based fabrics.
Global consumer-directed sales, consisting of company-owned retail stores and all online channel sales, increased eight percent on a reported basis in the second quarter and represented 23 percent of total sales.
HanesBrands’ U.S. Innerwear segment net sales decreased two percent in the second quarter, while operating profit decreased six percent. Sales of Innerwear basics decreased two percent in the quarter as expected, while sales of Innerwear intimates declined less than three percent in the quarter, improving sequentially from the first quarter. Intimates performance reflected continued double-digit growth for shapewear and progress in the company’s bra revitalization initiative. The U.S. Activewear segment’s second-quarter net sales increased more than 10 percent and operating profit increased nearly 20 percent. Operating margin increased 120 basis points to 15.3 percent.
Outside the mass channel, Champion sales increased more than 50 percent as a result of strong sell-through, space expansion, new distribution and growth in the consumer-directed, bookstore and distributor channels. The brand’s mass business, C9 by Champion, increased eight percent on strong sell-through. For the non-Champion portion of the segment, second-quarter sales declined, as expected, as the company exited commodity-oriented business in the mass channel and continues to focus on remixing sales to improve profitability.