HanesBrands, for the quarter ended September 28, 2019 said, net sales increased 1 percent to 1.87 billion dollars as reported and 2 percent in constant currency, international sales grew 7percent as reported and 11 percent in constant currency exceeding expectations with growth in both activewear and innerwear. Global sales of Champion activewear and innerwear increased 25 percent as reported and 26 percent in constant currency, both excluding the US mass channel. Third-quarter GAAP operating profit increased 5 percent to 270 million dollars, while adjusted operating profit increased 1 percent to 280 million dollars. GAAP diluted earnings per share of 51 cents increased 9 percent, and adjusted EPS of 54 cents increased 4 percent.
“We are proud to have met or exceeded our financial guidance for each of the first three quarters of the year, and we have now raised the midpoint of 2019 guidance for net sales and EPS,” said Hanes Chief Executive Officer Gerald W. Evans Jr. in a statement, adding, “We are driving significant operating cash flow growth, which was up approximately 100 million dollars in the quarter, and we have reduced our net debt by nearly a half-billion dollars since a year ago at this time. Our long-term outlook is strong.”
Callouts for financial results and outlook at HanesBrands
The company said, domestic Champion sales increased 29 percent, and international Champion sales increased 24 percent, with double-digit gains in Europe, Asia, and Australia. Sales also increased by double-digits in the activewear and innerwear product segments. For the year, Champion constant-currency sales have increased by approximately 470 million dollars in just the first three quarters versus full-year 2018 growth of approximately 360 million dollars. In the third quarter, the company also entered an agreement to add a distribution partner for Champion in South Korea. The company had previously announced the addition of a second distribution partner in China. Combined, the new distribution partners are expected to nearly double the number of Champion branded stores in China and Korea to more than 200 by the end of 2020.
Global consumer-directed sales, consisting of company-owned or brand retail stores and all online channel sales, increased 10 percent on a reported basis in the third quarter, representing 23 percent of total sales. On a constant-currency basis, consumer-directed sales increased 13 percent, up double-digits both domestically and internationally. The company added that international segment sales increased 7 percent as reported and 11 percent in constant currency as sales for both activewear and innerwear increased. Operating profit increased 8 percent as reported and 10 percent in constant currency.
In addition to double-digit Champion activewear growth in Europe, Asia and Australia, the segment’s innerwear sales increased across multiple brands in Australia, Germany, the United Kingdom, Mexico, and Canada, among others. However, innerwear segment net sales decreased 3.5 percent in the third quarter, while operating profit decreased 8 percent. Segment sales of 578 million dollars, below the company’s estimate, primarily as a result of a softer-than-expected back-to-school retail environment affecting innerwear basics replenishment. US activewear segment third-quarter net sales decreased 1 percent and operating profit increased 4 percent. Outside the mass channel, Champion activewear sales increased 18 percent.
Hanes updates full year guidance
Hanes now expects 2019 net sales of 6.935 billion dollars to 6.985 billion dollars, GAAP operating profit of 900 million dollars to 925 million dollars, adjusted operating profit of 955 million dollars to 980 million dollars, GAAP EPS of 1.61 dollars to 1.67 dollars, adjusted EPS of 1.74 dollars to 1.80 dollars, and net cash from operations of 700 million dollars to 800 million dollars.
At the midpoint, the updated 2019 guidance versus 2018 results represents net sales growth of more than 2 percent; GAAP and adjusted operating profit growth of 5 percent and 2 percent, respectively; GAAP and adjusted EPS growth of 8 percent and 4 percent, respectively; and operating cash flow growth of 17 percent.
For the fourth quarter, net sales are expected to be in the range of 1.719 billion dollars to 1.769 billion dollars. GAAP operating profit is expected to be 248 million dollars to 273 million dollars, and adjusted operating profit is expected to be 259 million dollars to 284 million dollars. GAAP EPS is expected to be 46 cents to 52 cents, and adjusted EPS is expected to be 48 cents to 54 cents.