By Brian Baker
Medill Reports
Shares of Hanesbrands Inc. fell nearly 11 percent Thursday after the company reported disappointing fourth quarter operating results and its 2018 guidance fell short of analyst estimates.
The Winston-Salem, N.C.-based company reported a $384.6 million loss for the quarter ended Dec. 30 or $1.06 per diluted share, compared with net income of $157.1 million or 41 cents per share in the same quarter a year ago.
Adjusted diluted earnings per share, which excluded a $457 million charge related to U.S. tax reform and other items, were 52 cents during the quarter, compared with 53 cents in the same quarter last year. Adjusted earnings per share matched the consensus estimate.
Sales during the quarter increased 4 percent to $1.65 billion from $1.58 billion driven by a 15 percent increase at the company’s Champion brand.
Hanesbrands revenue has steadily increased over the past five years.
(Brian Baker/MEDILL)
Operating margin fell more than 500 basis points to 7.3 percent in the quarter due to higher distribution costs related to late-quarter orders and an increase in marketing investments.
“While we’re not satisfied with our profit performance, we believe these issues are short-term in nature and we see a clear path to return to margin expansion,” said CEO Gerald Evans during a conference call with investors.
For the year, Hanesbrands earned $61.9 million, or 17 cents per diluted share, compared with $539.4 million, or $1.40 per diluted share, in the previous year. Revenue rose 7 percent to $6.47 billion from $6.03 billion in 2016.
The company expects 2018 sales to be between $6.72 billion and $6.82 billion representing growth of about 5 percent. Adjusted earnings per share are expected to be between $1.72 and $1.80, well below the analysts’ estimate of $2.04.
The shortfall is due in part to a cautious outlook for the U.S. physical retail environment and the impact of store closings during the first half of 2018.
The basic apparel giant also announced the acquisition of Bras N Things, an online seller of intimate apparel in Australia, New Zealand and South Africa, for about $400 million. Bras N Things had sales of roughly $144 million in 2017.
During the call, Evans said the Sydney-based company has “a proven process of driving growth through store optimization, disciplined pricing and successfully balancing core and seasonal products.” Hanesbrands believes the acquisition will help in attracting millennial consumers.
In a research note to clients, Cowen analyst John Kernan said he had concerns over Hanesbrands’ ability to generate increased organic growth while maintaining what he believes are peak operating margins.
The stock closed at $19.57, down $2.39.
