Acquisitions drive HBI’s sales once again

HanesBrands (HBI) reported a 12% YoY (year-over-year) increase in its 2Q17 sales to ~$1.6 billion, which is in line with Wall Street expectations and company guidance. “We continued our strong start to 2017 in the second quarter, consistent with our guidance,” said HanesBrands’ CEO, Gerald W. Evans, Jr.

However, the increase was mainly anchored by recent acquisitions, which contributed $220 million toward the top line. Organic sales continued to fall and were down 3% during the quarter. Driving this decline was the expected slowdown in sales in its Innerwear segment and its domestic manage-for-cash businesses. Also, negatively impacting growth was an unexpected shift in timing of its sports apparel sales.

Organic Sales Slide, Acquisitions Drive HanesBrands’ 2Q17 Top Line

Sequentially, organic sales showed some improvement. In the previous two quarters, organic sales were down 5% in 4Q16 and 4% in 1Q17.

“Organic sales trends continued to improve sequentially, acquisitions are contributing value as expected, and our cash-flow efforts, including disciplined inventory management, are generating strong results,” added Evans.

HBI’s management predicted a return to organic growth in 2H17, driven by improvement in its Innerwear business and Champion brand.

Digital channel and international business remain strong

The digital channel continued to show strength. After recording 28% growth in 1Q17, its 2Q17 sales were up 25%. HanesBrands’ management is looking for a strong double-digit growth in the company’s online business during the current fiscal year.

Innerwear sales continued to fall and were down 3% during the quarter. Activewear sales improved 1%, driven by acquisition benefits and revenue growth at the Hanes Retail and Online channels.

International sales increased 76%, driven by acquisitions and strong results in Asia.

Investors seeking exposure to HBI can consider pooled investment vehicles like the iShares Morningstar Mid-Cap ETF (JKG), which invests ~0.5% of its portfolio in HBI.

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