Yahoo Finance Hanesbrands (HBI) Q1 Loss Narrower Than Expected, Sales Down
Hanesbrands Inc. HBI reported mixed first-quarter 2024 results, with the top line declining year over year and missing the Zacks Consensus Estimate. The bottom line improved from the year-ago quarter’s reported figure and surpassed the consensus mark. Management reaffirmed its 2024 guidance.
Q1 in Detail
The company posted an adjusted loss from continuing operations of 2 cents per share, narrower than the Zacks Consensus Estimate, which was pegged at a loss of 6 cents. The metric improved from a loss of 6 cents per share reported in the year-ago quarter.
Net sales from continuing operations declined 16.8% to $1,156.2 million and came below the Zacks Consensus Estimate of $1,173.1 million. The metric includes nearly 120 basis points (bps) impact from the U.S. Hosiery divestiture and almost 105 bps from unfavorable currency rates. On a constant-currency basis, organic net sales fell nearly 15%. The downside was caused by headwinds in the Activewear segment.
Global Champion brand sales tumbled 26%, with a decline of 35% in the United States and 17% internationally. Global Champion brand sales fell 25% at constant currency (cc). International brand sales declined 16% at cc compared with the prior-year quarter’s tally.
Hanesbrands Inc. Price, Consensus and EPS Surprise
Hanesbrands Inc. price-consensus-eps-surprise-chart | Hanesbrands Inc. Quote
Adjusted gross profit came in at $461 million, up 2% year over year. We had expected the metric to come in at $408.3 million. The adjusted gross margin was 39.9%, up nearly 720 basis points (bps), exceeding our anticipation of 34.8%. The upside was driven by reduced input costs stemming from moderate commodity and ocean freight inflation. Gains from cost savings initiatives and the impact of the business mix also contributed to the upside.
Adjusted SG&A expenses declined 3% to $378 million on cost savings initiatives, disciplined expense management and reduced distribution expenses. The metric, as a percentage of net sales, increased 450 bps year over year to 32.7% due to deleveraging from reduced sales and increased brand marketing investments.
Adjusted operating profit came in at $84 million, up 32% year over year. Adjusted operating margin stood at 7.3%, up nearly 270 bps. We had expected adjusted operating profit and margin to be $71.5 million and 6.1%, respectively.
Segmental Details
Innerwear: The segment’s sales fell 8.4% year over year to $506.8 million. The downside can be attributed to the more-than-anticipated level of inventory management actions undertaken by some retailers. Despite a soft market trend, the company's focus on consumer-centric strategy is paying off, helping it gain market share and outperform peers. The segmental operating margin was 21.9%, up almost 880 bps.
Activewear: Sales plunged 30.9% to $217.7 million. The downside was due to factors like transitioning the Champion kids’ business to a license model from 2024 onward. Also, very strong collegiate sales performance, along with accelerated orders before the SAP implementation during the first quarter of 2023, was a hurdle. Apart from these, the ongoing challenges in the activewear apparel market due to subdued consumer demand and cautious retailer orders contributed to the downside. The segmental operating margin was 0.5%, down nearly 265 bps year over year.
International: Revenues in the International business declined 12.3% year over year to $406 million. This included nearly $15 million of unfavorable currency headwinds. We note that Latin America, Japan and China experienced growth at cc. However, the upside was offset by declines in Europe and Australia due to ongoing macroeconomic challenges affecting demand in these regions. The segmental operating margin stood at 12.3%, up nearly 120 bps.
Image Source: Zacks Investment Research
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $191.2 million, long-term debt of $3,237.4 million and total stockholders’ equity of $338.2 million. It had more than $1 billion of available capacity under its credit facility at the end of the quarter.
In the quarter, the company registered $26 million in net cash from operating activities. Free cash flow was $5 million in the first quarter of 2024.
Guidance
For 2024, net sales from continuing operations are anticipated to be $5.35-$5.47 billion, including anticipated headwinds of almost $50 million from the U.S. Hosiery divestiture and a currency headwind of nearly $45 million. The midpoint of the guidance suggests an almost 4% year-over-year decline on a reported basis and an approximately 2% decline on an organic basis at cc.
Adjusted operating profit from continuing operations is likely to be $500-$520 million, including a currency headwind expectation of roughly $9 million.
Adjusted earnings per share (EPS) from continuing operations is envisioned to be 42-48 cents. Cash flow from operations is forecast to be nearly $400 million, while capital investments are estimated to be almost $75 million.
For second-quarter 2024, net sales from continuing operations are expected to be $1.335-$1.375 billion, including a projected headwind of nearly $25 million from currency rates. The midpoint of the guidance suggests a nearly 6% year-over-year decline on a reported basis and an approximately 3% decline on an organic basis at cc. Adjusted operating profit from continuing operations is expected to be $115-$130 million. Adjusted earnings from continuing operations are envisioned to be 7-11 cents per share.
HBI’s shares have declined 8.2% in the past three months against the industry’s 3.1% growth.
Top 3 Picks
Skechers SKX, which designs, develops, markets and distributes footwear for men, women and children in the United States and overseas, sports a Zacks Rank #1 (Strong Buy) at present. SKX has a trailing four-quarter earnings surprise of 34.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Skechers’ current financial-year sales and earnings suggests growth of 10.3% and 15.2%, respectively, from the year-ago quarter’s reported figures.
Gildan Activewear Inc. GIL, a distributor and manufacturer of activewear products, currently carries a Zacks Rank #2 (Buy). GIL has a trailing four-quarter earnings surprise of 5.6%, on average.
The Zacks Consensus Estimate for Gildan Activewear's current fiscal-year earnings and sales suggests an improvement of 14.4% and 2.1%, respectively, from the year-earlier levels.
Kontoor Brands KTB, an apparel company, carries a Zacks Rank of 2 at present. KTB has a trailing four-quarter earnings surprise of 13%, on average.
The Zacks Consensus Estimate for KTB’s current fiscal-year earnings and sales suggests an improvement of 11% and 0.1%, respectively, from the year-earlier levels.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
Hanesbrands Inc. (HBI) : Free Stock Analysis Report
Gildan Activewear, Inc. (GIL) : Free Stock Analysis Report
Kontoor Brands, Inc. (KTB) : Free Stock Analysis Report
