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HanesBrands Plans to Sell Non-Core Businesses

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Price movement

HanesBrands (HBI) has a market cap of $8.3 billion. It fell 1.7% to close at $22.08 per share on December 15, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.5%, -14.3%, and -23.7%, respectively, on the same day.

HBI is trading 6.5% below its 20-day moving average, 8.9% below its 50-day moving average, and 15.6% below its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid-Cap Growth Index ETF (JKH) invests 0.66% of its holdings in HanesBrands. The YTD price movement of JKH was 6.6% on December 15.

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

  • L Brands (LB) — $20.6 billion
  • Ralph Lauren (RL) — $8.0 billion
  • Gildan Activewear (GIL) — $6.4 billion

Latest news on HBI

HanesBrands (HBI) entered into an agreement to sell the business and assets of Australian Dunlop Flooring to Victoria PLC for 34 million Australian dollars ($25 million). It is also selling its Tontine pillow and quilt business to John Cotton Group for 14 million Australian dollars ($10 million). Both transactions are expected to be settled in an all-cash transaction.

The company reported, “The businesses are noncore operations acquired as part of Hanes’ July 2016 purchase of Pacific Brands Limited of Australia.”

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Performance of HanesBrands in fiscal 3Q16

HanesBrands (HBI) reported fiscal 3Q16 net sales of $1.8 billion, a rise of 10.7% over net sales of $1.6 billion in fiscal 3Q15. The company’s gross profit margin expanded 40 basis points, and its operating margin narrowed 10 basis points.

Its net income and EPS (earnings per share) rose to $173.9 million and $0.45, respectively, in fiscal 3Q16, compared with $162.1 million and $0.40, respectively, in fiscal 3Q15. It reported adjusted EPS of $0.56 in fiscal 3Q16, a rise of 12.0% over fiscal 3Q15.

HanesBrands’s cash and cash equivalents and inventories rose 41.0% and 10.5%, respectively, between fiscal 4Q15 and fiscal 3Q16.

Projections

HanesBrands made the following projections for fiscal 2016:

  • net sales of $6.15 billion–$6.18 billion
  • non-GAAP (generally accepted accounting principles) EPS of $1.89–$1.92
  • non-GAAP operating profit of $940 million–$955 million

The company has made the following projections for fiscal 4Q16:

  • net sales of $1.70 billion–$1.73 billion
  • non-GAAP operating profit of $276 million–$291 million
  • non-GAAP EPS of $0.57–$0.60

In the next part, we’ll look at Flowers Foods (FLO).

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