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Yesterday’s Consumer Pops and Drops: HBI, HSY, MKC, and CAG

PART:
1 2 3 4 5 6 7 8 9 10
Part 2
Yesterday’s Consumer Pops and Drops: HBI, HSY, MKC, and CAG PART 2 OF 10

HanesBrands Acquires Champion Europe

Price movement 

HanesBrands (HBI) has a market cap of $9.5 billion. Its stock fell by 4.5% to close at $25.13 per share on June 30, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -5.1%, -9.1%, and -13.9%, respectively, on the same day. HBI is trading 5.2% below its 20-day moving average, 7.5% below its 50-day moving average, and 11.8% below its 200-day moving average.

HanesBrands Acquires Champion Europe

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Related ETF and peers

The iShares Morningstar Mid-Cap Growth ETF (JKH) invests 0.87% of its holdings in HanesBrands. The ETF tracks a market cap–weighted index of mid-cap companies selected by Morningstar based on their growth characteristics. The YTD price movement of JKH was 0.92% on June 30.

The market caps of HanesBrands’ competitors are as follows:

  • L Brands (LB): $19.3 billion
  • Ralph Lauren (RL): $7.4 billion
  • Gildan Activewear (GIL): $6.9 billion

HanesBrands acquires Champion Europe

HanesBrands has completed the acquisition of privately held Champion Europe in an all-cash transaction for the purchase price of ten times 2016 EBITDA (earnings before interest, tax, depreciation, and amortization), subject to adjustment for cash, debt, and working capital. Champion Europe owned the trademark for the Champion brand in the EMEA (Europe, the Middle East, and Africa) region. It expects the final purchase price to be ~200 million euros.

Performance in fiscal 1Q16

HanesBrands reported fiscal 1Q16 net sales of $1.22 billion—a rise of 0.84% compared to net sales of $1.21 billion in fiscal 1Q15. The company’s cost of sales as a percentage of net sales and operating profit rose by 1.6% and 36.2%, respectively, in fiscal 1Q16 compared to fiscal 1Q15.

The company’s net income and EPS (earnings per share) rose to $80.3 million and $0.21, respectively, compared to $52.6 million and $0.13, respectively, in fiscal 1Q15. It reported adjusted EPS of $0.26—a rise of 18.2% compared to fiscal 1Q15.

HanesBrands’ cash and cash equivalents and inventories rose by 4.1% and 8.6%, respectively, in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio and debt-to-equity ratio rose to 2.3x and 5.1x, respectively, in fiscal 1Q16, compared to 1.9x and 3.4x, respectively, in fiscal 4Q15.

Projections for 2016

The company revised its guidance for fiscal 2016. Its new projections are as follows:

  • net sales of $6.2 billion–$6.3 billion
  • EPS of $1.51–$1.57
  • operating profit of $780 million–$815 million
  • non-GAAP (generally accepted accounting principles) EPS of $1.89–$1.95
  • non-GAAP operating profit of $940 million–$975 million
  • net cash flows from operations of $750 million–$850 million
  • capital expenditures of ~$75 million
  • tax rate in the high single digits
  • contributions of ~$800 million in net sales and ~$70 million in operating profit before synergies from the acquisitions of Champion Europe and Pacific Brands

This guidance reflects the contribution from the acquisition of Champion Europe, which closed on June 30. It also reflects the pending acquisition of Pacific Brands, which is expected to close in July 2016.

In the next part of this series, we’ll look at General Mills.

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