Hanesbrands Inc. (HBI) reported first-quarter 2013 earnings per share of 51 cents compared to a loss of 25 cents suffered in the comparable prior-year quarter. Earnings beat the Zacks Consensus Estimate of 50 cents per share. During the first quarter, earnings were on the upswing on the back of success of the company’s ‘Innovate to Elevate’ strategy that focuses on value-added, higher-priced and higher-margin items that can be supplied at lower cost.
Revenues and Operating Profits
Quarterly revenues slipped 3% to $945.0 million, due to lower consumer demand, due to macroeconomic challenges. Revenues also missed the Zacks Consensus Estimate of $957.0 million.
The gross profit surged 28.3% year over year to $327.3 million, while gross profit margin inflated 140 basis points (bps) to 34.6% in the fourth quarter. The increase in gross profit resulted from positive pricing and shutdown of underperforming businesses.
Operating profit in the quarter increased significantly to $85.1 million froma loss of $10.6 million in the year ago quarter, given lower selling, general and administrative expenses. Operating profit margin expanded 790 bps to 9.0% on the back of lower cotton costs and positive pricing and success of Innovate-to-Elevate strategy, which helped improved the margins.
Segment Details
Innerwear: Net revenue for the Innerwear segment slipped 2.4% year over year to $497.0 million in the reported quarter due to soft retail environment. However, the decline was partly offset by decent sales of socks and bra which recorded sales growth in mid single-digits.
Operating profit in the segment shot up 69.0% year on year to $89.7 million and margin inflated 760 bps to 18%.
Activewear: Outerwear segment sales climbed 4% from the year-ago period to $267.2 million, driven by strong sales of Hanes branded products, including T-shirts, fleece and graphic apparel, as well as Champion branded products. Results excluded the decline in branded printwear sales, which the company is in the process of phasing out.
Activewear reported operating profit of $21.3 million compared to a loss of $18.7 million suffered a year ago.
International: Net sales in the International segment slipped 5.3% to $101.2 million in the quarter. Foreign exchange headwinds primarily hurt the segment results. Excluding currency, revenues in this segment increased 1% in the quarter. Operating profit, however, declined 53.0% to $2.3 million in this segment.
Direct to Consumer: Direct to Consumer segment sales declined 5.5% to $80.1 million and operating profit was $1.3 million compared to a loss of $7.6 million incurred a year ago.