Yahoo Finance Innerwear and Activewear Drive Hanesbrands in Fiscal 1Q16
Hanesbrands Enters 2016 in Style: Beats 1Q16 Earnings, Revenue
Snapshot of HBI’s performance in fiscal 1Q16
Hanesbrands (HBI) reported a 1% increase in net sales to $1.2 billion for fiscal 1Q16, which ended on April 2, 2016. Adjusted operating profit increased 10% to $147 million. Adjusted EPS (earnings per share) increased 18% to $0.26. The better-than-expected sales and earnings performance was a result of an improvement in the company’s core business operating margin. It was also due to the positive impact of Maidenform, Knights Apparel, and Hanes Europe Innerwear acquisitions.
Hanesbrands chairman and chief executive officer Richard A. Noll said, “We are off to a very good start and tracking to our plan to deliver another year of double-digit EPS growth.” Noll added, “We remain focused on our previously announced sales initiatives, reaping acquisition synergies, expanding margins, and developing growth plans for our pending acquisition of Champion Europe.”
Segment-wise top-line performance
The increase in the company’s top line was driven by a 1% increase in innerwear sales, or 46% of sales in 1Q16. It was also driven by a 3% increase in activewear sales, or 25.4% of sales. The company benefited from the acquisition of Knights Apparel and was negatively impacted by the bankruptcy of a sporting goods retailer. International sales, or 22.9% of sales, decreased 1% as a result of adverse currency exchange rates.
A look at profitability and margins
HBI’s adjusted operating margin stood at 12.1% in fiscal 1Q16, registering an increase of 110 basis points compared to fiscal 1Q15. The company’s GAAP (generally accepted accounting principles) operating margin for the quarter stood at 10%, an increase of 7.4% in fiscal 1Q15.
The company’s profitability has been better than apparel companies such as PVH (PVH) and Ralph Lauren (RL), which registered operating margins of 8.3% and 9.7%, respectively, in their last reported quarters. However, HBI trails Kate Spade (KATE), Michael Kors Holdings (KORS), and Coach (COH) in recent quarter profitability. KATE, KORS, and COH reported operating margins of 17.2%, 29.3%, and 20.5%, respectively, in their last reported quarters.
ETF investors seeking to add exposure to HBI can consider the iShares US Consumer Goods ETF (IYK), which invests 0.49% of its portfolio in HBI.
In the next part of the series, we’ll take a look at Hanesbrands’ shareholder returns.
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