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Hanesbrands Has Organic Sales Growth, 1st Time in 8 Quarters

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Domestic headwinds offset by strength in online and international sales

Hanesbrands (HBI) reported a 2.2% YoY (year-over-year) rise in its 3Q17 sales to $1.8 billion. That was in line with analysts’ expectations and company guidance.

Growth in HBI’s 3Q17 revenue was driven by a 16% YoY increase in sales from its International segment, even as domestic sales fell 3.1% YoY. Strong online sales coupled with growth in the Champion brand in Europe and Asia and other factors were behind the robust international growth.

However, in the domestic market, strength in the online channel couldn’t offset the impact of declining sales within the brick-and-mortar segment. A weaker-than-expected back-to-school season in retail also limited revenue growth in the quarter.

The company’s organic sales improved sequentially. Acquisitions contributed only $15 million to the top line compared to $220 million in the previous quarter.

“We returned to organic growth in the quarter as International results were stronger than expected,” said Hanes’s chief executive officer Gerald W. Evans Jr.

While talking about the importance of acquisitions, he said, “The concept of multiyear synergy contributions from our acquisitions is well understood. But what I believe is being overlooked is how these acquisitions are helping drive our long-term organic growth, as many of these are fast-growing businesses.”

A growing international presence and strong online sales

Just like earlier quarters, HBI’s digital channel continued to perform admirably, recording a 20% growth in 3Q17 (2Q17 sales rose 25%). Its online business, which accounted for 9% of HBI’s 3Q17 sales, recorded solid growth across all regions and product categories.

Innerwear sales in the domestic market, which accounted for 36% of 3Q17 sales, remained weak and fell 6%. Activewear sales managed to grow 2% YoY due to the acquisition of GTM Sportswear and growth recorded for the Champion brand in certain sales channels.

Investors who want exposure to HBI can consider pooled investment vehicles such as the PowerShares Contrarian Opportunities ETF (CNTR), which invests ~0.7% of its portfolio in HBI.

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