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What to Expect from Hanesbrands’ Margin and Bottom Line

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Margin numbers

For the fourth quarter of 2018, Hanesbrands (HBI) expects adjusted operating profit to be $251 million–$266 million. For 2018, the company forecasts adjusted operating profit at $940 million–$955 million.

For the first three quarters of 2018, Hanesbrands’ gross margin expanded 20 basis points to 38.8%, mainly due to higher sales. Sales for the first nine months of 2018 have increased by 4.3% YoY.

However, selling, general, and administrative (or SG&A) expenses have trended upward in 2018. For the first three quarters, SG&A expenses rose by 6.7% YoY. The company is investing in brand growth and strategic acquisitions. As a percentage of sales, the SG&A expense rate expanded 60 basis points to 26.4%.

Due to higher expenses, the operating profit marginally increased by 0.7% YoY to $623.0 million. Operating margin contracted 40 basis points to 12.4% for the first nine months of 2018.

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EPS numbers

As a result, Hanesbrands’ EPS from continuing operations for the first three quarters of 2018 was $1.08, a fall of 11.5% YoY. Higher expenses including interest expenses and a substantial rise in income tax expenses dented the bottom line performance in 2018.

For the fourth quarter of 2018, Wall Street analysts expect Hanesbrands’ adjusted EPS to fall by 11.5% YoY to $0.46. For fiscal 2018, analysts forecast Hanesbrands’ adjusted EPS to decline by 11.4% YoY to $1.71. However, for 2019, analysts expect adjusted EPS to increase by 5.3% to $1.80 on a YoY basis.

Hanesbrands’ dividend yield versus peers

Hanesbrands remains committed to paying dividends to stockholders despite extensive investments. Hanesbrands’ annualized dividend stands at $0.60. It last hiked its dividends by 36% in 2017.

Hanesbrands’ dividend yield was 4.5%, based on its January 7 closing price of $13.31. The dividend yields for VF (VFC), PVH Corp (PVH), and Ralph Lauren (RL) stood at 2.8%, 0.2%, and 2.3%, respectively.

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