HanesBrands sees skyrocketing sales at Champion, profits sapped by Sears bankruptcy

By

Robin Driver

Published
Nov 1, 2018

Despite a moderate rise in revenues driven by particularly strong sales at its Champion brand, North Carolina-based apparel group HanesBrands reported a 15.7% decline in net income in the third quarter of 2018, negatively impacted by a $14 million bad-debt reserve charge related to the recently declared bankruptcy of Sears Holdings Corporation.

 
The company’s net sales for the third quarter ended September 29, 2018 increased 3% (1% in constant currencies) to $1.85 billion, with growth in HanesBrands’ activewear and international segments (7% and 11%, respectively) partially offset by a 7% decrease in the innerwear segment.

Activewear brand Champion proved to be a real bright spot with sales rising 30% in constant currencies, thanks to strong double-digit growth in the US, Asia and Europe. Excluding the mass channel, the brand’s revenues increased 40%.

In terms of distribution channels, HanesBrands saw solid growth of 15% in its consumer-directed channels, both online and physical, which now account for 21% of total company sales.
 
Operating profit, however, was negatively impacted by the charge related to the Sears bankruptcy and slipped 1% to $257 million, while HanesBrands’ net income totaled $171.4 million, down from $203.4 million in the prior-year period.
 
“Our overall results were good and in line with our guidance on a pro forma basis. We made progress on our long-term goals of continued organic sales growth, higher profit margins, and reduced debt leverage,” said HanesBrands CEO Gerald W. Evans Jr. “We are diligently focused on delivering the fourth quarter, and we are off to a strong start in October with solid order bookings across our segments.”
 
In the fourth quarter, the company now expects to see net sales of between $1.70 billion and $1.74 billion, operating profit of between $236 million and $251 million, and earnings per share (EPS) in the range of $0.42 to $0.46.
 
This revised guidance takes the Sears bankruptcy into account, as the company previously expected to make around $15 million in sales and $5 million in operating profit through the department store chain.
 
Full-year 2018 net sales are now expected to be between $6.735 billion and $6.775 billion, while operating profit is predicted to be in the range of $860 million to $875 million. EPS  guidance is in the range of $1.50 to $1.54.