HanesBrands
(336) 519-8080
news release
FOR IMMEDIATE RELEASE
News
Media, contact: Matt
Hall, (336) 519-3386
Analysts
and Investors, contact: Charlie
Stack, (336) 519-4710
HANESBRANDS
REPORTS SECOND-QUARTER 2011 RESULTS AND CONFIRMS FULL-YEAR 2011 GUIDANCE FOR
SALES AND EPS GROWTH
Net Sales in the Quarter
Increased 14% and Diluted EPS was $0.87, the same as a year ago
WINSTON-SALEM, N.C. (July
20, 2011) – HanesBrands (NYSE: HBI) today reported strong net sales growth and
comparable diluted earnings per share in the second quarter of 2011, in line
with company expectations.
Diluted EPS for the second
quarter was $0.87, the same as a year ago when EPS benefited by $0.20 from a
lower income tax rate. Net sales for the second quarter increased nearly 14
percent to $1.23 billion, with sales gains in all business segments and particularly
strong growth in the Outerwear and International segments.
Hanes has confirmed its full-year
2011 diluted EPS guidance of $2.70 to $2.90 and net sales guidance of $4.9
billion to $5 billion. The guidance represents EPS growth over 2010 of 25
percent to 34 percent and net sales growth of 14 percent to 16 percent.
“We continued our strong start in 2011 and are performing in line with our growth expectations,” Hanes Chairman and Chief Executive Officer Richard A. Noll said. “Our brand strength, international expansion and acquisition contributions have driven six consecutive quarters of accelerating sales growth. We are leveraging this sales growth with our low-cost global supply chain and tight control of selling, general and administrative costs.”
Financial Highlights and Business Segment Summary
Growth in the quarter was driven by sales increases in each business segment, including strong double-digit increases in the International segment as well as the Outerwear segment, which benefited from last November’s acquisition of Gear For Sports.
The second-quarter operating margin increased 70 basis points over the year-ago quarter, despite $51 million in higher cotton and commodity costs and an operating profit decline in the Innerwear segment. The company’s operating margin in the quarter improved to 12.1 percent of sales, the highest since the company’s spinoff in September 2006.
Key business segment and brand highlights include:
·
Innerwear segment sales in the quarter increased
8 percent while operating profit declined by 1 percent. Sales of socks, male underwear
and women’s panties increased by double digits, and price increases taken this
year contributed to sales growth and partially offset inflationary input costs.
“Innerwear segment operating profit declined as a result of margin pressure
from cotton and other cost inflation, but price increases reduced the negative impact
compared with the first quarter,” said William J. Nictakis, Hanes’ co-operating
officer, president U.S. “We instituted a price increase in February and another
in June for cotton-intensive products. We continue to expect the segment’s
profitability to return to historical levels as we implement price increases appropriate
to the input-cost environment.”
·
Outerwear segment sales and operating profit increased
as a result of strong contributions from Gear For Sports, as well as Champion activewear sales growth.
Segment sales increased 26 percent – 23 percentage points of the gain came from
Gear For Sports – and operating profit more than doubled.
Gear For Sports, a leading seller of licensed logo apparel
in collegiate bookstores and the leisure/golf channels, contributed 6
percentage points of total company sales growth and $0.07 of EPS. Gear For
Sports sales, operating profit and acquisition synergies are all progressing in
line with company expectations.
·
The company is actively applying its U.S. brand
growth model in key international markets to generate strong results. International
segment sales in the quarter increased 24 percent, the third consecutive
quarter of 20-percent-plus growth. Operating profit increased 18 percent.
Excluding changes in currency exchange rates, segment sales increased 14
percent and operating profit increased 7 percent.
The company had strong growth in Asia, Latin America and Europe and has
instituted price increases to offset cost inflation. The TNF Group asset
acquisition in Australia contributed 3 percentage points of International
growth.
“We had strong growth across nearly all of our key international markets, including
China, India, Japan and Korea in Asia and Mexico and Brazil in Latin America,” said
Gerald W. Evans Jr., Hanes co-operating officer, president international. “We
have new programs coming on line for 2011 and 2012 to continue our expansion into
core product categories in key markets.”
· The Direct to Consumer and Hosiery segments both swung to increases in sales and operating profit from declines in the first quarter. The Direct segment’s sales increased 4 percent from a year ago and operating profit was up 29 percent, while the Hosiery segment’s sales and operating profit increased 6 percent and 10 percent, respectively.
2011 Guidance and
Macro Trend Discussion
Hanes has confirmed its full-year guidance for net sales and diluted EPS – $4.9 billion to $5 billion in net sales and $2.70 to $2.90 in EPS. Net sales in 2010 were $4.33 billion, and EPS was $2.16.
The company expects net sales growth in each of the third and fourth quarters to be in the low double digits to mid teens. For earnings, the company believes third-quarter EPS could increase as much as 30 percent over last year’s $0.63.
Full-year earnings expectations reflect multiple price increases throughout the year, the majority of which are already secured. The company has locked in its cotton requirements for the full year. EPS projections also assume: efficiency savings from supply chain optimization and the expectation that added costs in 2010 to service strong growth will not recur in 2011; continued investment in trade and media spending consistent with the company’s historical rate; slightly higher interest expense; and a higher full-year tax rate that could range from a percentage in the teens to the low 20s. The high end and low end of the guidance ranges represent consumer spending and demand elasticity that are better than or worse than, respectively, the company’s baseline assumptions.
Hanes continues to expect free cash flow in
The company expects its year-end net debt level to decrease over 2010 by the amount of free cash flow generated in 2011 and expects its year-end net-debt leverage ratio to improve to 3.0 to 3.5 times EBITDA.
Note on Proprietary
Information
As previously
communicated, Hanes believes that it has a competitive advantage in managing
its business during an inflationary environment as a result of both its supply
chain visibility and its extensive knowledge of consumer purchasing behavior.
Therefore, the company plans to continue treating certain data, such as future
cotton cost positions and price increase details, as proprietary information
until actual results are reported.
Note on Non-GAAP Terms and Definitions
EBITDA, net debt, net-debt leverage ratio, and free cash flow are not generally accepted accounting principle measures. EBITDA is earnings before interest, taxes, depreciation and amortization. Net debt is defined as the total of notes payable, current portion of debt and long-term debt, less cash and cash equivalents. The year-end net-debt leverage ratio is calculated by dividing net debt by full-year EBITDA. Free cash flow is defined as net cash provided by operating activities less net capital expenditures.
Hanes has chosen to provide these measures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating Hanes’ operations. This non-GAAP information should not be considered a substitute for financial information presented in accordance with GAAP and may be different from non-GAAP or other pro forma measures used by other companies. See Table 2 for more EBITDA information. Forward-looking non-GAAP measures have not been reconciled to comparable GAAP measures because not all of the information necessary for a quantitative reconciliation is available without unreasonable effort.
Webcast Conference Call
Hanes will host a live Internet webcast of its quarterly investor conference call at 8:30 a.m. EDT today. The broadcast may be accessed on the home page of the HanesBrands corporate website, www.hanesbrands.com. The call is expected to conclude by 9:30 a.m.
An archived replay of the conference call webcast will be available in the investors section of the HanesBrands website. A telephone playback will be available from approximately noon EDT today through midnight July 27, 2011. The replay will be available by calling toll-free (800) 642-1687, or by toll call at (706) 645-9291. The replay pass code is 82271927.
Cautionary
Statement Concerning Forward-Looking Statements
Statements in this press
release that are not statements of historical fact are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including those regarding
our long-term goals and trends associated with our business, as well as
guidance as to future performance. Examples of such statements include the
statements that follow the heading “2011 Guidance and Macro Trend Discussion”
above. These and other forward-looking statements are made only as of the date
of this press release and are based on our current intent, beliefs, plans and
expectations. They involve risks and uncertainties that could cause actual
future results, performance or developments to differ materially from those
described in or implied by such forward-looking statements. These risks and
uncertainties include the following: our ability to
successfully manage social, political, economic, legal and other conditions
affecting our domestic and foreign operations and supply-chain sources; the
impact of significant fluctuations and volatility in various input costs, such
as cotton and oil-related materials,
utilities, freight and wages; the impact of natural disasters; the impact of
the loss of one or more of our suppliers of finished goods or raw materials;
our ability to effectively manage our inventory and reduce inventory reserves;
our ability to optimize our global supply chain; consumer spending levels and
the price elasticity of our products; the risk of inflation or deflation; our
ability to continue to effectively distribute our products through our
distribution network; financial difficulties experienced by, or loss of or
reduction in sales to, any of our top customers or groups of customers; gains and losses in
the shelf space that our customers devote to our products; the highly
competitive and evolving nature of the industry in which we compete; our
ability to keep pace with changing consumer preferences; the impact of any
inadequacy, interruption or failure with respect to our information technology
or any data security breach; our debt and debt service requirements that
restrict our operating and financial flexibility and impose interest and
financing costs; the financial ratios that our debt instruments require us to
maintain; future financial performance, including availability, terms and
deployment of capital; our ability to comply with environmental and
occupational health and safety laws and regulations;
costs and adverse publicity from violations of labor or environmental laws by
us or our suppliers; and other risks
identified from time to time in our most recent Securities and Exchange
Commission reports, including our annual report on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K, registration statements, press
releases and other communications. Except as required by law, the company
undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
to future operating results over time.
HanesBrands
HanesBrands is a socially responsible leading marketer of everyday basic apparel under some of the world’s strongest apparel brands, including Hanes, Champion, Playtex, Bali, JMS/Just My Size, barely there, Wonderbra and Gear For Sports. The company sells T-shirts, bras, panties, men’s underwear, children’s underwear, socks, hosiery, casualwear and activewear produced in the company’s low-cost global supply chain. Hanes has approximately 55,000 employees in more than 25 countries and takes pride in its strong reputation for ethical business practices. More information about the company and its corporate social responsibility initiatives, including environmental, social compliance and community improvement achievements, may be found on the Hanes corporate website at www.hanesbrands.com. Hanes is a U.S. Environmental Protection Agency Energy Star Partner of the Year for 2010 and 2011 and ranks No. 91 on Newsweek magazine’s Top 500 greenest U.S. company rankings.
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