Hanesbrands Gains From Acquisitions & Cost-Saving Efforts

Hanesbrands Inc’s (NYSE:HBI) performance has been favorable, backed by its strategic acquisitions, cost-saving initiatives and sturdy growth in e-commerce business. Over the past six months, shares of the company have returned 10% compared with the industry’s 8.2% increase in the same time frame.

Let’s now delve at some of the aspects that have been positively impacting the company’s performance.

Sturdy Growth in e-commerce

Customers are resorting to online shopping to save time and effort. In order to capture this trend, Hanesbrands has been reallocating its resources and its personnel to strengthen online business. During the second quarter of 2017, sales from online channel increased 25%, mainly benefitting from Global Champion Activewear brand. Further, in order to cater to the needs of the online segment, management has been focusing on supply chain optimization and investing in domestic distribution center network.

Acquisitions Driving Growth

Hanesbrands involves in strategic acquisitions to strengthen its business portfolio. The buyouts provide the infrastructure, capability and systems to deliver to a broad set of retail customers, across the entire graphic apparel market. During the second quarter of 2017, acquisition related synergies contributed approximately $220 million in net sales. The benefits from acquisitions were mainly related to Champion Europe and Hanes Australasia that had been completed in 2016. Further, Champion Japan integration completed during the first quarter of 2016 has aided in bolstering its presence in Asia.

Cost-Saving Initiatives

Hanesbrands launched its Project Booster program in the first quarter of 2017 with the motive of generating investments, minimize costs and increase cash flow. By 2019, this project is anticipated to produce nearly $150 million of annualized cost savings, out of which roughly $50 million will be reinvested in targeted growth opportunities. Notably, this reinvestment should generate approximately $100 million in a run rate of net annualized savings that will begin by the end of 2019.

Also, the Innovate-to-Elevate strategy continues to drive the company’s adjusted operating profit margin and generate significant cumulative cash from operations.

Estimates Look Positive

Ahead of Hanesbrands’ third-quarter 2017 results, the Zacks Consensus Estimate for both the quarter as well as for 2017 have remained stable over the last 30 days. Estimated earnings for the upcoming quarter are currently pegged at 60 cents, which falls within the management’s guidance of 59–61 cents. Also, estimated earnings depict a year-over-year growth of 7.6%.

Further, estimated earnings of $1.98 for 2017, depict a growth of 7% from the prior-year period and also falls within managements anticipated earnings range of $1.93-$2.03.

Final Thoughts

Despite a decline in organic sales, the company has witnessed trends pertaining to the same to improve sequentially. Moreover, the company continues to expect organic sales to turn positive and contribute to growth in the second half. Sales are also expected to be benefitted from back-to-school shipments that are anticipated to fall in the third quarter.

Owing to the greater upsides associated with the stock, Hanesbrands currently carries a Zacks Rank #1 (Strong Buy). It holds a VGM Score of B and has a long-term growth rate of 10.7%.

Do Consumer Discretionary Stocks Interest You? Check These

Investors may also want to consider other stocks from the same sector. Guess?, Inc (NYSE:GES) and Deckers Outdoor Corporation (NYSE:DECK) sport a Zacks Rank #1 while lululemon athletica inc (NASDAQ:LULU) carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Guess? delivered an average positive earnings surprise of 20.6% in the trailing four quarters. It has a long-term earnings growth rate of 17.5%.

Deckers delivered an average positive earnings surprise of 76.7% in the trailing four quarters. It has a long-term earnings growth rate of 9.8%.

lululemon delivered an average positive earnings surprise of 8.5% over the trailing four quarters. It has a long-term earnings growth rate of 13.2%.

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