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Full Potential Plan Aids Hanesbrands (HBI), High Costs Ail
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Hanesbrands Inc. (HBI - Free Report) is benefiting from strength in the Full Potential plan, unveiled in May 2021. The iconic apparel maker’s focus on innovation is yielding well. That being said, the company is not immune to an inflationary environment.
Let’s delve deeper.
What’s Working Well for Hanesbrands?
The Zacks Rank #3 (Hold) company is progressing well with its Full Potential plan, which includes growing the global Champion brand, reigniting innerwear growth, driving consumer-centricity and focusing on the portfolio. Hanesbrands continues to invest in the Champion brand globally.
Management is seeing significant growth opportunities as it expands women's and kids businesses for the brand. Expanding into new markets like China and deepening adjacent product categories, including footwear, bodes well. The company purchased the Champion trademark for footwear in North America during the second quarter of 2022. Furthermore, it continued to invest in the Champion brands distribution network by consolidating down to two wholesale Champion distribution centers (DCs) in the quarter.
Image Source: Zacks Investment Research
Hanesbrands is on track to execute its full potential supply chain strategies to remain competitive and balance speed, cost and flexibility to boost top-line growth and increase margins over time. Management is adding additional automation to various DCs. The company is streamlining the portfolio, shedding non-core lower-margin businesses and lowering skews for business simplification. The company is focused on efforts to lower SKUs. Management plans to further reduce SKUs by 30%, with few benefits coming during 2022.
Efforts to bolster brands via robust innovation are likely to keep supporting Hanesbrands. In its last earnings call, management highlighted that it is rolling out new product innovations across men's and women's categories with an impressive pipeline extending beyond 2023. The company is on track with its innovation ideas across basics and intimates brands, which are likely to drive continued retail space gains.
Margin Pressure
During the second quarter of 2022, Hanesbrands’ adjusted gross profit came in at $573 million, down from $684 million reported in the year-ago quarter. Adjusted gross margin was 37.8%, down almost 120 basis points (bps) due to reduced sales volume, input cost inflation, additional costs related to the cyber event and unfavorable foreign currency rates. Adjusted operating profit came in at $154 million, down $82 million from the second quarter of 2021 levels. Adjusted operating margin of 10.2% contracted nearly 335 bps.
All said, it is yet to be seen if the aforementioned upsides can help Hanesbrands stay afloat amid the hurdles. HBI’s stock has declined 27% in the past three months compared with the industry’s fall of 7.2%.
Solid Consumer Discretionary Bets
Lululemon Athletica Inc. (LULU - Free Report) , the designer and distributor of athletic apparel and accessories, sports a Zacks Rank of 1 at present. LULU has an expected EPS growth rate of 20% for three-five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings per share (EPS) suggests growth of 26.6% and 26.8%, respectively, from the preceding fiscal year’s reported numbers. LULU has a trailing four-quarter earnings surprise of 10.4%, on average.
Oxford Industries (OXM - Free Report) is a renowned apparel company. It currently sports a Zacks Rank #1. OXM has a trailing four-quarter earnings surprise of 91.1%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial-year revenues and EPS suggests growth of almost 22% and 31.2%, respectively, from the earlier fiscal year’s reported figures.
Crocs, Inc. (CROX - Free Report) , casual lifestyle footwear and accessories provider, carries a Zacks Rank #2 (Buy) at present. The company has a trailing four-quarter earnings surprise of 21.9%, on average.
The Zacks Consensus Estimate for Crocs’ current-year sales and EPS suggests growth of 49.7% and 20.7%, respectively, from the year-ago reported figures. CROX has an expected EPS growth rate of 15% for three-five years.
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Full Potential Plan Aids Hanesbrands (HBI), High Costs Ail
Hanesbrands Inc. (HBI - Free Report) is benefiting from strength in the Full Potential plan, unveiled in May 2021. The iconic apparel maker’s focus on innovation is yielding well. That being said, the company is not immune to an inflationary environment.
Let’s delve deeper.
What’s Working Well for Hanesbrands?
The Zacks Rank #3 (Hold) company is progressing well with its Full Potential plan, which includes growing the global Champion brand, reigniting innerwear growth, driving consumer-centricity and focusing on the portfolio. Hanesbrands continues to invest in the Champion brand globally.
Management is seeing significant growth opportunities as it expands women's and kids businesses for the brand. Expanding into new markets like China and deepening adjacent product categories, including footwear, bodes well. The company purchased the Champion trademark for footwear in North America during the second quarter of 2022. Furthermore, it continued to invest in the Champion brands distribution network by consolidating down to two wholesale Champion distribution centers (DCs) in the quarter.
Image Source: Zacks Investment Research
Hanesbrands is on track to execute its full potential supply chain strategies to remain competitive and balance speed, cost and flexibility to boost top-line growth and increase margins over time. Management is adding additional automation to various DCs. The company is streamlining the portfolio, shedding non-core lower-margin businesses and lowering skews for business simplification. The company is focused on efforts to lower SKUs. Management plans to further reduce SKUs by 30%, with few benefits coming during 2022.
Efforts to bolster brands via robust innovation are likely to keep supporting Hanesbrands. In its last earnings call, management highlighted that it is rolling out new product innovations across men's and women's categories with an impressive pipeline extending beyond 2023. The company is on track with its innovation ideas across basics and intimates brands, which are likely to drive continued retail space gains.
Margin Pressure
During the second quarter of 2022, Hanesbrands’ adjusted gross profit came in at $573 million, down from $684 million reported in the year-ago quarter. Adjusted gross margin was 37.8%, down almost 120 basis points (bps) due to reduced sales volume, input cost inflation, additional costs related to the cyber event and unfavorable foreign currency rates. Adjusted operating profit came in at $154 million, down $82 million from the second quarter of 2021 levels. Adjusted operating margin of 10.2% contracted nearly 335 bps.
All said, it is yet to be seen if the aforementioned upsides can help Hanesbrands stay afloat amid the hurdles. HBI’s stock has declined 27% in the past three months compared with the industry’s fall of 7.2%.
Solid Consumer Discretionary Bets
Lululemon Athletica Inc. (LULU - Free Report) , the designer and distributor of athletic apparel and accessories, sports a Zacks Rank of 1 at present. LULU has an expected EPS growth rate of 20% for three-five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings per share (EPS) suggests growth of 26.6% and 26.8%, respectively, from the preceding fiscal year’s reported numbers. LULU has a trailing four-quarter earnings surprise of 10.4%, on average.
Oxford Industries (OXM - Free Report) is a renowned apparel company. It currently sports a Zacks Rank #1. OXM has a trailing four-quarter earnings surprise of 91.1%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial-year revenues and EPS suggests growth of almost 22% and 31.2%, respectively, from the earlier fiscal year’s reported figures.
Crocs, Inc. (CROX - Free Report) , casual lifestyle footwear and accessories provider, carries a Zacks Rank #2 (Buy) at present. The company has a trailing four-quarter earnings surprise of 21.9%, on average.
The Zacks Consensus Estimate for Crocs’ current-year sales and EPS suggests growth of 49.7% and 20.7%, respectively, from the year-ago reported figures. CROX has an expected EPS growth rate of 15% for three-five years.