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Hanesbrands Inc. (HBI - Free Report) reported mixed second-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. Challenges in the consumer and apparel market hurt results. Management lowered its net sales and earnings view for 2024.
Q2 in Detail
The company posted adjusted earnings from continuing operations of 15 cents per share, surpassing the Zacks Consensus Estimate, which was pegged at 10 cents. The metric increased from 2 cents per share reported in the year-ago quarter.
Net sales from continuing operations declined nearly 4% to $995 million and came below the Zacks Consensus Estimate of $1,350.6 million. The metric includes an impact of nearly 130 basis points (bps) from the U.S. Hosiery divestiture and almost 150 bps from unfavorable currency rates. On a constant-currency (cc) basis, organic net sales inched down nearly 1%. Macroeconomic headwinds in Australia caused the downside. Improved innerwear sales in the United States somewhat offset this.
Hanesbrands Inc. Price, Consensus and EPS Surprise
Adjusted gross profit came in at $396 million, up 11% year over year. The adjusted gross margin was 39.8%, up nearly 525 bps and exceeding our anticipation of 38.9%. The year-over-year improvement can be attributed to reduced input costs, as it continues to benefit from the effects of peak inflation receding and ongoing cost-saving measures.
Adjusted SG&A expenses stood at $270 million, flat year over year. As a percentage of net sales, adjusted SG&A expenses increased by 100 bps to 27.1%. This increase was largely due to a 125 bps rise in brand marketing investments within the U.S. innerwear segment. However, it was partially mitigated by cost-saving measures and careful expense management.
Adjusted operating profit came in at $126 million, up 46% year over year. Adjusted operating margin stood at 12.7%, up 430 bps. We had expected adjusted operating profit and margin to be $122.2 million and 9%, respectively.
Segmental Details
Starting with second-quarter 2024, HBI reorganized its reporting segments into U.S. and International categories.
U.S. Segment: The segment’s net sales dropped 1% year over year. Despite the anticipated market downturn this quarter, the company’s consumer-centric strategy proved effective. Hanesbrands captured an additional 40 bps of innerwear market share, driven by increased marketing investments and innovations in its Hanes, Maidenform and Bali brands. These efforts led to gains in retail space, attracted younger consumers and produced point-of-sale trends that outpaced the market. The segmental operating margin was 21.4%, up almost 470 bps.
International Segment: International net sales fell by about 4% on a reported basis, which includes a $15-million impact from unfavorable foreign exchange rates. At cc, international sales rose 2% year over year, with growth in the Americas and Asia outweighing the anticipated macroeconomic-driven decline in Australia. The operating margin improved to 12%, up nearly 380 bps and driven by reduced input costs and the advantages of cost-saving measures.
Image Source: Zacks Investment Research
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $213.8 million, long-term debt of $3,224.2 million and total stockholders’ equity of $64.4 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 $78 million in net cash from operating activities. Free cash flow was $71 million in second-quarter 2024.
On Jun 5, 2024, the company announced a definitive agreement to sell the global Champion business to Authentic Brands Group (ABG), with the transaction expected to be finalized in the second half of 2024.
Guidance
For 2024, net sales from continuing operations are anticipated to be $3.59-$3.63 billion, including anticipated headwinds of almost $50 million from the U.S. Hosiery divestiture and a currency headwind of nearly $40 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. Earlier, net sales from continuing operations were anticipated to be $5.35-$5.47 billion.
Adjusted operating profit from continuing operations is likely to be $395-$415 million, including a currency headwind expectation of approximately $9 million. The metric was expected to be in the range of $500-$520 million.
Adjusted earnings per share (EPS) from continuing operations are envisioned to be 31-37 cents compared with 42-48 cents expected earlier. Cash flow from operations is forecast to be nearly $200 million, while capital investments are estimated to be almost $50 million.
For third-quarter 2024, net sales from continuing operations are expected to be $920-$950 million, including anticipated headwinds of almost $17 million from the U.S. Hosiery divestiture and a currency headwind of nearly $4 million. The midpoint of the guidance suggests a nearly 3% year-over-year decline on a reported basis and an approximately 1% decline on an organic basis at cc. Adjusted operating profit from continuing operations is expected to be $105-$120 million. Adjusted earnings from continuing operations are envisioned to be 9-14 cents per share.
HBI’s shares have gained 11.1% in the past three months against the industry’s 16.1% decline.
Top 3 Picks
Wolverine World Wide (WWW - Free Report) is engaged in the designing, manufacturing and distribution of a wide variety of casual and active apparel and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WWW’s current financial-year sales indicates a decline of 23.2% from the year-ago reported figures.
Kontoor Brands (KTB - Free Report) , an apparel company, carries a Zacks Rank #2 (Buy) at present. KTB has a trailing four-quarter earnings surprise of 12.3%, on average.
The Zacks Consensus Estimate for Kontoor Brands’ current financial-year sales and earnings indicates growth of 0.1% and 12.7%, respectively, from the year-ago reported figures.
Skechers (SKX - Free Report) designs, develops, markets and distributes footwear for men, women and children in the United States and overseas. The company has a Zacks Rank #2 at present.
The Zacks Consensus Estimate for Skechers’ current financial-year sales and earnings indicates growth of 11.8% and 19.2%, respectively, from the year-ago actuals. SKX has a trailing four-quarter earnings surprise of 11.2%, on average.
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Hanesbrands (HBI) Trims FY24 View Despite Q2 Earnings Beat
Hanesbrands Inc. (HBI - Free Report) reported mixed second-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. Challenges in the consumer and apparel market hurt results. Management lowered its net sales and earnings view for 2024.
Q2 in Detail
The company posted adjusted earnings from continuing operations of 15 cents per share, surpassing the Zacks Consensus Estimate, which was pegged at 10 cents. The metric increased from 2 cents per share reported in the year-ago quarter.
Net sales from continuing operations declined nearly 4% to $995 million and came below the Zacks Consensus Estimate of $1,350.6 million. The metric includes an impact of nearly 130 basis points (bps) from the U.S. Hosiery divestiture and almost 150 bps from unfavorable currency rates. On a constant-currency (cc) basis, organic net sales inched down nearly 1%. Macroeconomic headwinds in Australia caused the downside. Improved innerwear sales in the United States somewhat offset this.
Hanesbrands Inc. Price, Consensus and EPS Surprise
Hanesbrands Inc. price-consensus-eps-surprise-chart | Hanesbrands Inc. Quote
Adjusted gross profit came in at $396 million, up 11% year over year. The adjusted gross margin was 39.8%, up nearly 525 bps and exceeding our anticipation of 38.9%. The year-over-year improvement can be attributed to reduced input costs, as it continues to benefit from the effects of peak inflation receding and ongoing cost-saving measures.
Adjusted SG&A expenses stood at $270 million, flat year over year. As a percentage of net sales, adjusted SG&A expenses increased by 100 bps to 27.1%. This increase was largely due to a 125 bps rise in brand marketing investments within the U.S. innerwear segment. However, it was partially mitigated by cost-saving measures and careful expense management.
Adjusted operating profit came in at $126 million, up 46% year over year. Adjusted operating margin stood at 12.7%, up 430 bps. We had expected adjusted operating profit and margin to be $122.2 million and 9%, respectively.
Segmental Details
Starting with second-quarter 2024, HBI reorganized its reporting segments into U.S. and International categories.
U.S. Segment: The segment’s net sales dropped 1% year over year. Despite the anticipated market downturn this quarter, the company’s consumer-centric strategy proved effective. Hanesbrands captured an additional 40 bps of innerwear market share, driven by increased marketing investments and innovations in its Hanes, Maidenform and Bali brands. These efforts led to gains in retail space, attracted younger consumers and produced point-of-sale trends that outpaced the market. The segmental operating margin was 21.4%, up almost 470 bps.
International Segment: International net sales fell by about 4% on a reported basis, which includes a $15-million impact from unfavorable foreign exchange rates. At cc, international sales rose 2% year over year, with growth in the Americas and Asia outweighing the anticipated macroeconomic-driven decline in Australia. The operating margin improved to 12%, up nearly 380 bps and driven by reduced input costs and the advantages of cost-saving measures.
Image Source: Zacks Investment Research
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $213.8 million, long-term debt of $3,224.2 million and total stockholders’ equity of $64.4 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 $78 million in net cash from operating activities. Free cash flow was $71 million in second-quarter 2024.
On Jun 5, 2024, the company announced a definitive agreement to sell the global Champion business to Authentic Brands Group (ABG), with the transaction expected to be finalized in the second half of 2024.
Guidance
For 2024, net sales from continuing operations are anticipated to be $3.59-$3.63 billion, including anticipated headwinds of almost $50 million from the U.S. Hosiery divestiture and a currency headwind of nearly $40 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. Earlier, net sales from continuing operations were anticipated to be $5.35-$5.47 billion.
Adjusted operating profit from continuing operations is likely to be $395-$415 million, including a currency headwind expectation of approximately $9 million. The metric was expected to be in the range of $500-$520 million.
Adjusted earnings per share (EPS) from continuing operations are envisioned to be 31-37 cents compared with 42-48 cents expected earlier. Cash flow from operations is forecast to be nearly $200 million, while capital investments are estimated to be almost $50 million.
For third-quarter 2024, net sales from continuing operations are expected to be $920-$950 million, including anticipated headwinds of almost $17 million from the U.S. Hosiery divestiture and a currency headwind of nearly $4 million. The midpoint of the guidance suggests a nearly 3% year-over-year decline on a reported basis and an approximately 1% decline on an organic basis at cc. Adjusted operating profit from continuing operations is expected to be $105-$120 million. Adjusted earnings from continuing operations are envisioned to be 9-14 cents per share.
HBI’s shares have gained 11.1% in the past three months against the industry’s 16.1% decline.
Top 3 Picks
Wolverine World Wide (WWW - Free Report) is engaged in the designing, manufacturing and distribution of a wide variety of casual and active apparel and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WWW’s current financial-year sales indicates a decline of 23.2% from the year-ago reported figures.
Kontoor Brands (KTB - Free Report) , an apparel company, carries a Zacks Rank #2 (Buy) at present. KTB has a trailing four-quarter earnings surprise of 12.3%, on average.
The Zacks Consensus Estimate for Kontoor Brands’ current financial-year sales and earnings indicates growth of 0.1% and 12.7%, respectively, from the year-ago reported figures.
Skechers (SKX - Free Report) designs, develops, markets and distributes footwear for men, women and children in the United States and overseas. The company has a Zacks Rank #2 at present.
The Zacks Consensus Estimate for Skechers’ current financial-year sales and earnings indicates growth of 11.8% and 19.2%, respectively, from the year-ago actuals. SKX has a trailing four-quarter earnings surprise of 11.2%, on average.