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A Look at HanesBrands’s Performance in 2Q16

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Price movement

HanesBrands (HBI) has a market cap of $9.9 billion. It fell by 3.4% to close at $25.65 per share on August 2, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.4%, 0.20%, and -12.1%, respectively, on the same day.

HBI is trading 2.8% below its 20-day moving average, 3.3% below its 50-day moving average, and 9.0% below its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid-Cap Growth Index ETF (JKH) invests 0.69% 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 4.4% on August 2.

The market caps of HanesBrands’s competitors are as follows:

  • L Brands (LB) — $20.7 billion
  • Ralph Lauren (RL) — $7.7 billion
  • Gildan Activewear (GIL) — $6.9 billion

Performance of HanesBrands in fiscal 2Q16

HanesBrands reported fiscal 2Q16 net sales of $1.47 billion, a fall of 3.3% compared to net sales of $1.52 billion in fiscal 2Q15. Sales from Innerwear, Activewear, and Direct to Consumer segments fell by 4.7%, 3.6%, and 3.7%, respectively. Sales from the International segment rose by 1.9% in fiscal 2Q16 compared to fiscal 2Q15.

The company’s gross profit margin and operating profit rose to 1.4% and 59.2%, respectively, in fiscal 2Q16 compared to fiscal 2Q15.

Its net income and EPS (earnings per share) rose to $128.1 million and $0.34, respectively, in fiscal 2Q16 compared to $94.9 million and $0.23, respectively, in fiscal 2Q15. It reported adjusted EPS of $0.51 in fiscal 2Q16, a rise of 2.0% compared to fiscal 2Q15.

HanesBrands’s cash and cash equivalents and inventories rose by 107.1% and 10.6%, respectively, in fiscal 2Q16 compared to fiscal 4Q15. Its current ratio and debt-to-equity ratio rose to 2.3x and 5.3x, respectively, in fiscal 2Q16, compared to 1.9x and 3.4x, respectively, in fiscal 4Q15.

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Quarterly dividend

HanesBrands has declared a regular quarterly cash dividend of $0.11 per share on its common stock. The dividend will be paid on September 7, 2016, to shareholders of record at the close of business on August 16, 2016.

Projections

HanesBrands has made the following projections for fiscal 2016:

  • net sales: ~$6.2 billion to ~$6.3 billion
  • EPS: $1.44–$1.54
  • operating profit: $760 million–$795 million
  • non-GAAP EPS: $1.89–$1.95
  • non-GAAP operating profit: $940 million–$975 million
  • net cash flow from operations: ~$750 million–$850 million
  • capital expenditures: ~$90 million, which includes $15 million due to the acquisition of Champion Europe and Pacific Brands
  • It expects the tax rate to be in the high single-digits.

This guidance reflects the contribution from the completed acquisition of Champion Europe and Pacific Brands Limited.

For an ongoing analysis of this sector, please visit Market Realist’s Consumer Discretionary page.

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