In a Nutshell: HanesBrands said the diversification of its global business model supported the company’s execution of its Sell More, Spend Less and Generate Cash strategies in the first quarter. The acquisitions of Bras N Things and Alternative Apparel contributed to sales growth in the period, while organic sales growth, driven by increased Champion and online sales, more than offset declines in the U.S. brick-and-mortar channel. International operating profit growth was offset by declines in domestic operating profit.
The company, based in Winston-Salem, N.C., said its latest innovation, Hanes Comfort Flex Fit men’s underwear boxer briefs, was introduced to a warm consumer reception in the quarter. Raw material inflation and short-term higher distribution costs hurt the activewear segment’s operating profit, which fell 12 percent.
The company said it continues to expect full-year 2018 net sales of $6.72 billion to $6.82 billion and operating profit of $870 million to $905 million. Second-quarter net sales are expected to fall in the range of $1.7 billion to $1.725 billion.
Sales: Hanesbrands reported net sales grew 6.6% to $1.47 billion from $1.38 billion for the first quarter ended March 31, compared to a guidance range of $1.42 billion to $1.44 billion. Net sales for Bras N Things, acquired in February, and Alternative Apparel, purchased in October, totaled a combined $32 million in the quarter. Global Champion sales increased 22 percent.
Global consumer-direct sales, consisting of company retail and online channel sales, increased 23 percent in the quarter and represented 21 percent of total sales. Company retail sales, which includes company-owned stores and dedicated brand stores, increased 24 percent, while online channel sales, which includes company websites, traditional retailer websites and pure-play Internet retailers, increased 20 percent.
Innerwear Intimates sales fell 7 percent, driven down by soft shapewear sales and retailer door closings. Bra sales were off less than 2 percent, with ongoing improvement initiatives gaining traction.
Earnings: Net income rose 12.5% to $79.4 million from $70.62 million in the prior-year period. Operating profit increased 15.5% in the three months to $149.1 million, fueled by a 46.3% gain in the International segment that helped to balance a 13 percent loss in the Innerwear unit and an 11.7% decline in Activewear.
CEO’s Take: Gerald W. Evans Jr., CEO, said: “We are reaping ongoing benefits from diversifying our business through geographic expansion, Champion brand growth globally and increased sales in the online channel. We have created powerful cash-generating global innerwear and activewear businesses that can leverage our leading market positions and brands, our robust global supply chain and our global management expertise.”