02/15/24
8:30 am EST
Most Recent
Press Release
HanesBrands Reports First-Quarter 2018 Financial Results
HanesBrands Reports First-Quarter 2018 Financial Results
May 1, 2018 at 7:34 AM EDT
-
Net Sales of
$1.47 Billion Increased 7% with Constant-Currency Organic Sales Growth of 1% -
GAAP EPS of
$0.22 increased 16% and Adjusted EPS of$0.26 decreased 10% -
Company Announces Investor Day Meeting to be held
May 15, 2018 , inWinston-Salem
For the quarter ended
Hanes has reiterated its full-year guidance and issued net sales and EPS guidance for the second-quarter 2018. (See financial guidance section for details. See Note on Adjusted Measures and Reconciliation to GAAP Measures later in this news release for additional discussion and details.)
“We are focused on delivering quarterly results consistent with the
promises we make in our guidance,” said Hanes Chief Executive Officer
Key Callouts for First-Quarter 2018 Financial Results
The diversification of Hanes’ global business model supported the company’s execution of its Sell More, Spend Less and Generate Cash strategies in the first quarter. The acquisitions of Bras N Things and Alternative Apparel contributed to sales growth in the quarter, while organic sales growth, driven by increased Champion and online sales, more than offset declines in the U.S. brick-and-mortar channel. International operating profit growth was offset by declines in domestic operating profit. Key callouts follow.
Acquisition Contributions and
Double-Digit Growth in Global Consumer-Directed Sales Continues. Global consumer-directed sales, consisting of company retail and online channel sales, increased 23 percent in the first quarter and represented 21 percent of total sales. Company retail sales, which includes company-owned stores and dedicated brand stores, increased 24 percent, while online channel sales, which includes company websites, traditional retailer websites and pure-play Internet retailers, increased 20 percent, up in every geography.
Tax Reform Effect on EPS Comparisons. U.S. tax reform, which resulted in a higher corporate tax rate beginning in 2018, affects the year-over-year comparisons for EPS. When applying the 2018 first-quarter tax rate to 2017 first-quarter results, GAAP EPS increased 29 percent on a pro forma basis and adjusted EPS was consistent with a year ago.
Business Segment Summaries
Beginning in the first-quarter 2018, Hanes has eliminated the business-segment allocation of certain overhead selling, general and administrative expenses related to global functions in order to reflect the manner in which businesses are managed. Prior-year segment operating profit results have been revised to conform to the current presentation of segment results.
Innerwear Results Consistent with Expectations. U.S. Innerwear segment sales decreased 3 percent, as expected, and operating profit decreased 13 percent, affected by raw material inflation and lower volume.
Innerwear Basics sales decreased less than 1 percent, with growth in socks and children’s underwear sales offset by declines primarily in women’s underwear. The company’s latest innovation, Hanes Comfort Flex Fit men’s underwear boxer briefs, were successfully introduced in the quarter and met with good consumer reception.
Innerwear Intimates sales decreased 7 percent, primarily affected by soft shapewear sales and retailer door closings within the past year. Bra sales decreased less than 2 percent with improving trends as ongoing improvement initiatives are gaining traction.
Activewear Sales Increase on Acquisition Benefits and Champion Growth. U.S. Activewear segment sales increased 6 percent in the quarter, benefitting from the acquisition of Alternative Apparel. Organic sales increased 1 percent despite space constraints in the mass channel. Champion sales increased at a high-single-digit rate. Online channel sales for the segment increased 26 percent in the quarter and represented 10 percent of sales.
Although mix of products sold was favorable, segment operating profit decreased 12 percent due to raw material inflation and short-term higher distribution costs.
International Segment Achieves Strong Double-Digit Sales and Profit Growth. International sales increased 19 percent and operating profit increased 46 percent, benefitting from foreign currency exchange rates, organic growth, synergies from past acquisitions, and contributions from the mid-quarter acquisition of Bras N Things. The segment’s operating margin of 13.5 percent increased 250 basis points over the year-ago quarter.
International constant-currency organic sales increased 7 percent on
strong double-digit Champion sales growth in
2018 Financial Guidance
Hanes has reiterated full-year financial guidance for 2018 and has issued second-quarter guidance for net sales and EPS.
The company continues to expect full-year 2018 net sales of
With U.S. income tax reform, the company expects the 2018 full-year tax rate to be approximately 16 percent.
Key assumptions in the company’s guidance include: a cautious outlook for the U.S. brick-and-mortar consumer environment, including the first-half effect of door closures; an increase in full-year organic sales driven by online, global Champion, and International growth; and higher commodity costs and increased marketing investment to support additional planned product innovation.
Second-Quarter Guidance. Second-quarter net sales are expected to
be in the range of
FASB Note. In keeping with a new
Hanes has updated its quarterly frequently-asked-questions document, which is available at www.Hanes.com/faq.
Note on Adjusted Measures and Reconciliation to GAAP Measures
To supplement financial guidance prepared in accordance with generally accepted accounting principles, the company provides quarterly and full-year results and guidance concerning certain non-GAAP financial measures, including adjusted EPS, adjusted net income, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin), EBITDA and adjusted EBITDA.
Adjusted EPS is defined as diluted EPS from continuing operations excluding actions and the tax effect on actions. Adjusted net income is defined as net income from continuing operations excluding actions and the tax effect on actions. Adjusted operating profit is defined as operating profit excluding actions. Adjusted gross profit is defined as gross profit excluding actions. Adjusted SG&A is defined as selling, general and administrative expenses excluding actions.
Charges for actions taken in the first quarter and for guidance for the full year primarily represent acquisition-related and integration costs related to Hanes Europe Innerwear, Hanes Australasia, Champion Europe, Alternative Apparel and Bras N Things. Acquisition and integration costs include legal fees, consulting fees, bank fees, severance costs, certain purchase accounting items, facility closures, inventory write-offs, information technology integration costs and similar charges. While these costs are not operational in nature and are not expected to continue for any singular transaction on an ongoing basis, similar types of costs, expenses and charges have occurred in prior periods and may recur in the future depending upon acquisition activity.
Hanes has chosen to present these non-GAAP measures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating operations absent the effect of acquisitions and other actions. Hanes believes these non-GAAP measures provide management and investors with valuable supplemental information for analyzing the operating performance of the company’s ongoing business during each period presented without giving effect to costs associated with the execution and integration of any of the aforementioned actions taken.
In addition, the company has chosen to present EBITDA and adjusted EBITDA to investors because it considers these measures to be an important supplemental means of evaluating operating performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding actions and stock compensation expense. Hanes believes that EBITDA and adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, and management uses EBITDA and adjusted EBITDA for planning purposes in connection with setting its capital allocation strategy. EBITDA and adjusted EBITDA should not, however, be considered as measures of discretionary cash available to invest in the growth of the business.
Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as an alternative to, or substitute for, financial results prepared in accordance with GAAP. Further, the non-GAAP measures presented may be different from non-GAAP measures with similar or identical names presented by other companies.
In the first-quarter 2018, Hanes incurred
For 2018 guidance, Hanes expects full-year GAAP EPS of
Webcast Conference Call
Hanes will host an Internet webcast of its first-quarter investor
conference call at
An archived replay of the conference call webcast will be available in
the investors section of the Hanes corporate website. A telephone
playback will be available from approximately
Investor Day Webcast
Hanes will host an Investor Day informational meeting for registered
participants and stock analysts at its
A live Internet broadcast of the meeting, including audio and slides, is expected to end by noon and may be accessed at www.Hanes.com/investors.
The company will review its global business strategies, key initiatives,
and long-term financial goals. Several members of management will speak,
including
An archived replay of the meeting webcast and copies of the presentation slides will be available in the investors section of the Hanes corporate website.
Cautionary Statement Concerning Forward-Looking Statements
This press release contains certain forward-looking statements, as
defined under U.S. federal securities laws, with respect to our
long-term goals and trends associated with our business, as well as
guidance as to future performance. In particular, among others,
statements following the heading 2018 Financial Guidance, are
forward-looking statements. These forward-looking statements are based
on our current intent, beliefs, plans and expectations. Readers are
cautioned not to place any undue reliance on any forward-looking
statements. Forward-looking statements necessarily involve risks and
uncertainties, many of which are outside of our control, that could
cause actual results to differ materially from such statements and from
our historical results and experience. These risks and uncertainties
include such things as: the highly competitive and evolving nature of
the industry in which we compete; the rapidly changing retail
environment; any inadequacy, interruption, integration failure or
security failure with respect to our information technology; the impact
of significant fluctuations and volatility in various input costs, such
as cotton and oil-related materials, utilities, freight and wages; our
ability to properly manage strategic projects; significant fluctuations
in foreign exchange rates; our ability to attract and retain a senior
management team with the core competencies needed to support our growth
in global markets; legal, regulatory, political and economic risks
related to our international operations; our ability to successfully
integrate acquired businesses; our reliance on a relatively small number
of customers for a significant portion of our sales; and other risks
identified from time to time in our most recent
TABLE 1 |
|||||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Income (in thousands, except per-share amounts) (Unaudited) |
|||||||||||||
Quarter Ended | |||||||||||||
March 31, |
April 1, 2017 |
% Change | |||||||||||
Net sales | $ | 1,471,504 | $ | 1,380,355 | 6.6% | ||||||||
Cost of sales | 892,583 | 840,824 | |||||||||||
Gross profit | 578,921 | 539,531 | 7.3% | ||||||||||
As a % of net sales | 39.3 | % | 39.1 | % | |||||||||
Selling, general and administrative expenses | 432,863 | 413,102 | |||||||||||
As a % of net sales | 29.4 | % | 29.9 | % | |||||||||
Operating profit | 146,058 | 126,429 | 15.5% | ||||||||||
As a % of net sales | 9.9 | % | 9.2 | % | |||||||||
Other expenses | 5,761 | 6,545 | |||||||||||
Interest expense, net | 45,763 | 42,137 | |||||||||||
Income from continuing operations before income tax expense | 94,534 | 77,747 | |||||||||||
Income tax expense | 15,125 | 4,665 | |||||||||||
Income from continuing operations | 79,409 | 73,082 | 8.7% | ||||||||||
Loss from discontinued operations, net of tax | — | (2,465 | ) | ||||||||||
Net income | $ | 79,409 | $ | 70,617 | 12.5% | ||||||||
Earnings (loss) per share - basic: | |||||||||||||
Continuing operations | $ | 0.22 | $ | 0.20 | |||||||||
Discontinued operations | — | (0.01 | ) | ||||||||||
Net income | $ | 0.22 | $ | 0.19 | 15.8% | ||||||||
Earnings (loss) per share - diluted: | |||||||||||||
Continuing operations | $ | 0.22 | $ | 0.19 | |||||||||
Discontinued operations | — | (0.01 | ) | ||||||||||
Net income | $ | 0.22 | $ | 0.19 | 15.8% | ||||||||
Weighted average shares outstanding: | |||||||||||||
Basic | 361,882 | 373,218 | |||||||||||
Diluted | 363,291 | 375,251 | |||||||||||
TABLE 2 |
||||||||||||||
HANESBRANDS INC. Supplemental Financial Information (in thousands) (Unaudited) |
||||||||||||||
Quarter Ended | ||||||||||||||
March 31, 2018 |
April 1, 2017 |
% Change | ||||||||||||
Segment net sales: | ||||||||||||||
Innerwear | $ | 491,078 | $ | 505,190 | (2.8 | )% | ||||||||
Activewear | 346,125 | 327,343 | 5.7 | |||||||||||
International | 569,887 | 477,398 | 19.4 | |||||||||||
Other | 64,414 | 70,424 | (8.5 | ) | ||||||||||
Total net sales | $ | 1,471,504 | $ | 1,380,355 | 6.6 | % | ||||||||
Segment operating profit1: | ||||||||||||||
Innerwear | $ | 101,419 | $ | 116,622 | (13.0 | )% | ||||||||
Activewear | 38,287 | 43,350 | (11.7 | ) | ||||||||||
International | 77,061 | 52,662 | 46.3 | |||||||||||
Other | 2,627 | 2,628 | — | |||||||||||
General corporate expenses/other | (53,719 | ) | (50,466 | ) | 6.4 | |||||||||
Acquisition, integration and other action-related charges | (19,617 | ) | (38,367 | ) | (48.9 | ) | ||||||||
Total operating profit | $ | 146,058 | $ | 126,429 | 15.5 | % | ||||||||
¹ | In the first quarter of 2018, HanesBrands eliminated the allocation of certain corporate overhead selling, general and administrative expenses related to the legal, human resources, information technology, finance and real estate departments to the segments, in order to reflect the manner in which the business is managed and results are reviewed by the chief executive officer, who is HanesBrands’ chief operating decision maker. Prior year segment operating profit disclosures have been revised to conform to the current year presentation. |
The following table presents a reconciliation of total reported net sales to organic constant currency net sales for the quarter ended March 31, 2018 and a comparison to prior year: |
Quarter Ended March 31, 2018 | ||||||||||||||||||||||||
Reported |
Acquisitions1 |
Impact from |
Organic |
% Change |
||||||||||||||||||||
Segment net sales: | ||||||||||||||||||||||||
Innerwear | $ | 491,078 | $ | — | $ | — | $ | 491,078 | (2.8 | )% | ||||||||||||||
Activewear | 346,125 | 15,630 | — | 330,495 | 1.0 | |||||||||||||||||||
International | 569,887 | 16,137 | 44,859 | 508,891 | 6.6 | |||||||||||||||||||
Other | 64,414 | — | — | 64,414 | (8.5 | ) | ||||||||||||||||||
Total | $ | 1,471,504 | $ | 31,767 | $ | 44,859 | $ | 1,394,878 | 1.1 | % | ||||||||||||||
1 |
Net sales derived from businesses acquired within the past twelve months. | |
2 |
Effect of the change in foreign currency exchange rates year-over-year. Calculated by applying prior period exchange rates to the current year net sales. This calculation excludes entities acquired within the past twelve months. | |
TABLE 3 |
|||||||||
HANESBRANDS INC. Condensed Consolidated Balance Sheets (in thousands) (Unaudited) |
|||||||||
March 31, 2018 |
December 30, 2017 |
||||||||
Assets | |||||||||
Cash and cash equivalents | $ | 373,662 | $ | 421,566 | |||||
Trade accounts receivable, net | 874,684 | 903,318 | |||||||
Inventories | 2,044,680 | 1,874,990 | |||||||
Other current assets | 106,800 | 186,496 | |||||||
Total current assets | 3,399,826 | 3,386,370 | |||||||
Property, net | 630,669 | 623,991 | |||||||
Trademarks and other identifiable intangibles, net | 1,668,876 | 1,402,857 | |||||||
Goodwill | 1,282,504 | 1,167,007 | |||||||
Deferred tax assets | 233,279 | 234,932 | |||||||
Other noncurrent assets | 112,621 | 79,618 | |||||||
Total assets | $ | 7,327,775 | $ | 6,894,775 | |||||
Liabilities | |||||||||
Accounts payable and accrued liabilities | $ | 1,337,147 | $ | 1,517,283 | |||||
Notes payable | 17,830 | 11,873 | |||||||
Accounts Receivable Securitization Facility | 157,081 | 125,209 | |||||||
Current portion of long-term debt | 165,702 | 124,380 | |||||||
Total current liabilities | 1,677,760 | 1,778,745 | |||||||
Long-term debt | 4,185,252 | 3,702,054 | |||||||
Pension and postretirement benefits |
408,787 |
405,238 |
|||||||
Other noncurrent liabilities | 350,281 | 322,536 | |||||||
Total liabilities | 6,622,080 | 6,208,573 | |||||||
Equity | 705,695 | 686,202 | |||||||
Total liabilities and equity | $ | 7,327,775 | $ | 6,894,775 | |||||
TABLE 4 |
||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) |
||||||||||
Quarter Ended | ||||||||||
March 31, 2018 |
April 1, 2017 |
|||||||||
Operating Activities: | ||||||||||
Net income | $ | 79,409 | $ | 70,617 | ||||||
Depreciation and amortization | 31,925 | 28,765 | ||||||||
Stock compensation expense | 4,746 | 3,528 | ||||||||
Other noncash items | (452 | ) | 9,632 | |||||||
Changes in assets and liabilities, net | (243,771 | ) | (135,340 | ) | ||||||
Net cash from operating activities | (128,143 | ) | (22,798 | ) | ||||||
Investing Activities: | ||||||||||
Purchases/sales of property and equipment, net, and other | (18,298 | ) | (11,446 | ) | ||||||
Acquisition of business, net of cash acquired | (334,915 | ) | (524 | ) | ||||||
Disposition of businesses | — | 37,434 | ||||||||
Net cash from investing activities | (353,213 | ) | 25,464 | |||||||
Financing Activities: | ||||||||||
Cash dividends paid | (54,053 | ) | (55,875 | ) | ||||||
Share repurchases | — | (299,919 | ) | |||||||
Net borrowings on notes payable, debt and other | 513,137 | 360,305 | ||||||||
Net cash from financing activities | 459,084 | 4,511 | ||||||||
Effect of changes in foreign currency exchange rates on cash | 1,186 | (3,799 | ) | |||||||
Change in cash, cash equivalents and restricted cash | (21,086 | ) | 3,378 | |||||||
Cash and cash equivalents at beginning of year | 421,566 | 460,245 | ||||||||
Cash, cash equivalents and restricted cash at end of period | 400,480 | 463,623 | ||||||||
Less restricted cash at end of period | 26,818 | — | ||||||||
Cash and cash equivalents per balance sheet at end of period | $ | 373,662 | $ | 463,623 | ||||||
TABLE 5 |
||||||||||||
HANESBRANDS INC. Supplemental Financial Information Reconciliation of Select GAAP Measures to Non-GAAP Measures (in thousands, except per-share amounts) (Unaudited) |
||||||||||||
Quarter Ended | ||||||||||||
March 31, 2018 |
April 1, 2017 |
|||||||||||
Gross profit, as reported under GAAP | $ | 578,921 | $ | 539,531 | ||||||||
Acquisition, integration and other action-related charges | 10,753 | 15,475 | ||||||||||
Gross profit, as adjusted | $ | 589,674 | $ | 555,006 | ||||||||
As a % of net sales | 40.1 | % | 40.2 | % | ||||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 432,863 | $ | 413,102 | ||||||||
Acquisition, integration and other action-related charges | (8,864 | ) | (22,892 | ) | ||||||||
Selling, general and administrative expenses, as adjusted | $ | 423,999 | $ | 390,210 | ||||||||
As a % of net sales | 28.8 | % | 28.3 | % | ||||||||
Operating profit, as reported under GAAP | $ | 146,058 | $ | 126,429 | ||||||||
Acquisition, integration and other action-related charges included in gross profit | 10,753 | 15,475 | ||||||||||
Acquisition, integration and other action-related charges included in SG&A | 8,864 | 22,892 | ||||||||||
Operating profit, as adjusted | $ | 165,675 | $ | 164,796 | ||||||||
As a % of net sales | 11.3 | % | 11.9 | % | ||||||||
Net income from continuing operations, as reported under GAAP | $ | 79,409 | $ | 73,082 | ||||||||
Acquisition, integration and other action-related charges included in gross profit | 10,753 | 15,475 | ||||||||||
Acquisition, integration and other action-related charges included in SG&A | 8,864 | 22,892 | ||||||||||
Debt refinance charges included in other expenses | (50 | ) | — | |||||||||
Tax effect on actions | (3,131 | ) | (2,302 | ) | ||||||||
Net income from continuing operations, as adjusted | $ | 95,845 | $ | 109,147 | ||||||||
Diluted earnings per share from continuing operations, as reported under GAAP | $ | 0.22 | $ | 0.19 | ||||||||
Acquisition and other related charges | 0.05 | 0.10 | ||||||||||
Diluted earnings per share from continuing operations, as adjusted | $ | 0.26 | $ | 0.29 | ||||||||
Quarter Ended | ||||||||||||
March 31, 2018 |
April 1, 2017 |
|||||||||||
Action and other related charges by category: | ||||||||||||
Hanes Europe Innerwear | $ | 8,576 | $ | 19,878 | ||||||||
Hanes Australasia | 6,092 | 12,008 | ||||||||||
Champion Europe | 1,880 | 1,168 | ||||||||||
Bras N Things | 1,245 | — | ||||||||||
Smaller acquisitions and other action-related costs | 1,824 | 5,313 | ||||||||||
Debt refinance charges | (50 | ) | — | |||||||||
Tax effect on actions | (3,131 | ) | (2,302 | ) | ||||||||
Total action and other related charges | $ | 16,436 | $ | 36,065 | ||||||||
Last Twelve Months | ||||||||||||
March 31, 2018 |
April 1, 2017 |
|||||||||||
EBITDA1: | ||||||||||||
Net income from continuing operations | $ | 70,318 | $ | 529,740 | ||||||||
Interest expense, net | 178,061 | 163,263 | ||||||||||
Income tax expense | 483,739 | 29,016 | ||||||||||
Depreciation and amortization | 125,647 | 109,120 | ||||||||||
Total EBITDA | 857,765 | 831,139 | ||||||||||
Total action and other related charges (excluding tax effect on actions) | 179,104 | 199,508 | ||||||||||
Stock compensation expense | 24,800 | 27,800 | ||||||||||
Total EBITDA, as adjusted | $ | 1,061,669 | $ | 1,058,447 | ||||||||
Net debt: | ||||||||||||
Debt (current and long term debt and Accounts Receivable Securitization Facility) | $ | 4,508,035 | $ | 4,096,525 | ||||||||
Notes payable | 17,830 | 43,418 | ||||||||||
(Less) Cash and cash equivalents | (373,662 | ) | (463,623 | ) | ||||||||
Net debt | $ | 4,152,203 | $ | 3,676,320 | ||||||||
Net debt/EBITDA, as adjusted | 3.9 | 3.5 | ||||||||||
1 |
Earnings from continuing operations before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. | |
TABLE 6 |
||||||
HANESBRANDS INC. Supplemental Financial Information Reconciliation of GAAP Outlook to Adjusted Outlook (in thousands, except per-share amounts) (Unaudited) |
||||||
Quarter Ended | Year Ended | |||||
June 30, 2018 |
December 29, 2018 |
|||||
Operating profit outlook, as calculated under GAAP | $215,000 to $225,000 | $870,000 to $905,000 | ||||
Acquisition, integration and other action-related charges | $25,000 | $80,000 | ||||
Operating profit outlook, as adjusted | $240,000 to $250,000 | $950,000 to $985,000 | ||||
Diluted earnings per share from continuing operations, as calculated under GAAP | $0.38 to $0.40 | $1.54 to $1.62 | ||||
Acquisition, integration and other action-related charges | $0.06 | $0.18 | ||||
Diluted earnings per share from continuing operations, as adjusted | $0.44 to $0.46 | $1.72 to $1.80 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180501005890/en/
Source:
HanesBrands
News Media:
Matt Hall, 336-519-3386
or
Analysts
and Investors:
T.C. Robillard, 336-519-2115
Data Provided by Refinitiv. Minimum 15 minutes delayed.