HBI Meets 2Q17 Earnings Expectations, Reaffirms Guidance



A look at HBI’s 2Q17 bottom line

HanesBrands (HBI), which released its 2Q17 results on August 1, reported a 4% YoY (year-over-year) increase in diluted adjusted earnings per share (or EPS) to $0.53. This increase was largely driven by the company’s share buyback program. HBI’s net income increased less than 1% during the quarter to $197.0 million.

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A look at the 2Q17 margins

HBI’s gross margin improved 100 basis points to 39.5% of sales, driven by a favorable sales mix. This sales mix resulted from international acquisitions and supply chain–related efficiency gains.

However, the operating margin was down 120 basis points to 15.5% of sales but was better than the company guidance and Wall Street expectations. This decline was mainly attributable to $8 million in Project Booster–related expenses and the impact of short-term dilution from acquisitions.

Management reaffirms guidance

HanesBrands’ management reaffirmed its fiscal 2017 guidance. The company expects $935 million–$975 million in fiscal 2017 adjusted operating profit on total sales of about $6.5 billion–$6.6 billion. At the midpoint, this represents 8% growth in net sales growth and 5% growth in adjusted operating profit.

Comparing HBI’s operating profit with its peers

HBI displays better profitability than most of its peers. The company’s trailing-12-month (or TTM) GAAP[1. generally accepted accounting principles] operating profit stands at 12.1%. In comparison, PVH Corp. (PVH), Ralph Lauren (RL), and Gap (GPS) reported TTM operating margins of 7.3%, -1.9%, and 7.9%, respectively.

Investors seeking diversified exposure to HBI can consider the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 0.33% of its portfolio in HBI.


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