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HanesBrands (HBI) Down 6.4% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for HanesBrands (HBI - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is HanesBrands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hanesbrands Q1 Earnings Meet Estimates, Sales Fall Y/Y
Hanesbrands reported mixed first-quarter 2023 results, with the top line beating the Zacks Consensus Estimate and the bottom line matching the same. Both metrics declined year over year. The company posted an adjusted loss from continuing operations of 6 cents a share, which matched the Zacks Consensus Estimate. The metric declined from 34 cents per share earned in the year-ago quarter.
Q1 in Detail
Net sales from continuing operations declined 11.8% to $1,389.4 million but came above the Zacks Consensus Estimate of $1,375 million. The metric includes a $31 million negative impact from foreign exchange rates. On a constant-currency (cc) basis, net sales fell 10%. The downside was caused by a macro-driven slowdown in consumer spending across the United States and Australia.
Global Champion brand sales tumbled 17%, with a decline of 22% across the United States and a 12% fall internationally. At cc, Global Champion brand sales fell 15%, with a 7% decline internationally.
Adjusted gross profit came in at $454.2 million. The adjusted gross margin was 32.7%, down 440 basis points (bps) due to impacts of commodity and ocean freight inflation coupled with lower sales, adverse product mix and increased labor rates. These were somewhat offset by innerwear pricing actions, lower air freight costs and savings from the Full Potential initiative.
Adjusted operating profit came in at $63.4 million, down from $67.3 million in the first quarter of 2022.
Segmental Details
Innerwear: The segment’s sales fell 4% year over year. The downside was a result of macroeconomic pressures, which dented consumer spending and more than offset the partial quarter gains from last year’s mid-quarter price rise. The segmental operating margin was 13.1%, down 450 bps.
Activewear: Sales decreased 19% from the year-ago quarter’s level, driven by the slowdown in consumer spending, which led to lower point-of-sale and increased inventory levels at retail. By channel, sturdy growth in the collegiate channel was more than offset by decreases in the other channels, particularly in printwear. By brand, Champion sales within the Activewear segment plunged 19% year over year, while sales of other activewear brands slipped 19%. The segmental operating margin of 3.2% contracted nearly 950 bps.
International: Revenues in the International business declined 9% year over year. This included $31 million of unfavorable currency headwinds. At cc, International sales dipped 3%, as increases in Europe, the Americas and Japan were offset by a fall in Australia and China. The segmental operating margin stood at 11.1%, down nearly 645 bps.
Other Financial Details
The company ended the quarter with cash and cash equivalents of $213.2 million, long-term debt of $3,588.9 million and total stockholders’ equity of $339.5 million. It had roughly $730 million of available capacity under its credit facility at the end of the quarter.
For the quarter that ended Apr 1, 2023, the company provided $45 million in net cash from operating activities. Free cash flow was $20 million in the first quarter. Inventory came in at $1,969.1 million, down 1% year over year.
2023 Guidance
For 2023, net sales from continuing operations are still anticipated to be $6.05-$6.20 billion, including an anticipated currency headwind of nearly $40 million. The midpoint of the guidance suggests a 2% year-over-year decline on a reported basis and a nearly 1% fall at cc.
Adjusted operating profit from continuing operations is likely to be in the $500-$550 million range, including a currency headwind expectation of roughly $5 million. In 2023, Hanesbrands expects to incur charges associated with the Full Potential plan of nearly $54 million. Adjusted earnings per share (EPS) from continuing operations is envisioned to be in the 31-42 cents range. Cash flow from operations is forecast to be $500 million while capital investments are estimated to be nearly $150 million.
For second-quarter 2023, net sales from continuing operations are expected to be $1.42-$1.47 billion, including a projected headwind of nearly $20 million from currency rates. At the midpoint, the guidance reflects nearly a 3% year-over-year net sales decline on a cc basis or a 5% decline on a reported basis.
Adjusted operating profit from continuing operations is expected in the range of $70-$90 million, including a projected headwind of nearly $3 million from currency rates. Adjusted loss per share from continuing operations is envisioned in the 5 cents to break even. Hanesbrands expects to incur charges associated with the Full Potential plan of nearly $15 million in the same quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 28.57% due to these changes.
VGM Scores
At this time, HanesBrands has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, HanesBrands has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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HanesBrands (HBI) Down 6.4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for HanesBrands (HBI - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is HanesBrands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hanesbrands Q1 Earnings Meet Estimates, Sales Fall Y/Y
Hanesbrands reported mixed first-quarter 2023 results, with the top line beating the Zacks Consensus Estimate and the bottom line matching the same. Both metrics declined year over year. The company posted an adjusted loss from continuing operations of 6 cents a share, which matched the Zacks Consensus Estimate. The metric declined from 34 cents per share earned in the year-ago quarter.
Q1 in Detail
Net sales from continuing operations declined 11.8% to $1,389.4 million but came above the Zacks Consensus Estimate of $1,375 million. The metric includes a $31 million negative impact from foreign exchange rates. On a constant-currency (cc) basis, net sales fell 10%. The downside was caused by a macro-driven slowdown in consumer spending across the United States and Australia.
Global Champion brand sales tumbled 17%, with a decline of 22% across the United States and a 12% fall internationally. At cc, Global Champion brand sales fell 15%, with a 7% decline internationally.
Adjusted gross profit came in at $454.2 million. The adjusted gross margin was 32.7%, down 440 basis points (bps) due to impacts of commodity and ocean freight inflation coupled with lower sales, adverse product mix and increased labor rates. These were somewhat offset by innerwear pricing actions, lower air freight costs and savings from the Full Potential initiative.
Adjusted operating profit came in at $63.4 million, down from $67.3 million in the first quarter of 2022.
Segmental Details
Innerwear: The segment’s sales fell 4% year over year. The downside was a result of macroeconomic pressures, which dented consumer spending and more than offset the partial quarter gains from last year’s mid-quarter price rise. The segmental operating margin was 13.1%, down 450 bps.
Activewear: Sales decreased 19% from the year-ago quarter’s level, driven by the slowdown in consumer spending, which led to lower point-of-sale and increased inventory levels at retail. By channel, sturdy growth in the collegiate channel was more than offset by decreases in the other channels, particularly in printwear. By brand, Champion sales within the Activewear segment plunged 19% year over year, while sales of other activewear brands slipped 19%. The segmental operating margin of 3.2% contracted nearly 950 bps.
International: Revenues in the International business declined 9% year over year. This included $31 million of unfavorable currency headwinds. At cc, International sales dipped 3%, as increases in Europe, the Americas and Japan were offset by a fall in Australia and China. The segmental operating margin stood at 11.1%, down nearly 645 bps.
Other Financial Details
The company ended the quarter with cash and cash equivalents of $213.2 million, long-term debt of $3,588.9 million and total stockholders’ equity of $339.5 million. It had roughly $730 million of available capacity under its credit facility at the end of the quarter.
For the quarter that ended Apr 1, 2023, the company provided $45 million in net cash from operating activities. Free cash flow was $20 million in the first quarter. Inventory came in at $1,969.1 million, down 1% year over year.
2023 Guidance
For 2023, net sales from continuing operations are still anticipated to be $6.05-$6.20 billion, including an anticipated currency headwind of nearly $40 million. The midpoint of the guidance suggests a 2% year-over-year decline on a reported basis and a nearly 1% fall at cc.
Adjusted operating profit from continuing operations is likely to be in the $500-$550 million range, including a currency headwind expectation of roughly $5 million. In 2023, Hanesbrands expects to incur charges associated with the Full Potential plan of nearly $54 million. Adjusted earnings per share (EPS) from continuing operations is envisioned to be in the 31-42 cents range. Cash flow from operations is forecast to be $500 million while capital investments are estimated to be nearly $150 million.
For second-quarter 2023, net sales from continuing operations are expected to be $1.42-$1.47 billion, including a projected headwind of nearly $20 million from currency rates. At the midpoint, the guidance reflects nearly a 3% year-over-year net sales decline on a cc basis or a 5% decline on a reported basis.
Adjusted operating profit from continuing operations is expected in the range of $70-$90 million, including a projected headwind of nearly $3 million from currency rates. Adjusted loss per share from continuing operations is envisioned in the 5 cents to break even. Hanesbrands expects to incur charges associated with the Full Potential plan of nearly $15 million in the same quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 28.57% due to these changes.
VGM Scores
At this time, HanesBrands has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, HanesBrands has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.