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Can Hanesbrands’ International Gains Offset Weak US Sales?


Hanesbrands Inc’s HBI top line has been gaining from the stellar performance of international business and sturdy growth in e-commerce channel. However, Hanesbrands domestic operations have been soft owing to a tough retail landscape.

Let’s now delve into the factors impacting Hanesbrands performance of late.

International Business Aids Organic Sales

After reporting bleak performance for eight straight quarters, Hanesbrands posted organic sales growth for the first time during third-quarter 2017. The upside can be attributed to solid International sales, which represented nearly 31% of the top line. Extensive growth in online sales contributed toward the international segment’s performance. Moreover, management expects organic sales to continue gaining from international business in the upcoming periods.

Strategic Acquisitions & e-commerce Bode Well

Hanesbrands undertakes strategic acquisitions to strengthen portfolio and increase infrastructural capabilities. The company has been gaining from the buyouts of Champion Europe and Hanes Australasia. In October, the company announced the buyout of Alternative Apparel which is expected to generate net sales of roughly $70 million in 2017 and boost the Activewear business.

Apart from strategic takeovers, Hanesbrands also relies on online business to drive top-line performance. The company’s online sales were impressive during third-quarter 2017, as sales growth from global online channels was in the high 20s range. Going ahead, Hanesbrands is focused on making incremental investments in online business to keep up with consumers’ evolving shopping patterns.

Factors Denting Performance

Recently, Hanesbrands performance in the United States has been dismal owing to a tough retail landscape and adverse weather conditions. Further, increased marketing investments in the region may also hamper the company’s profits.

Apart from this, the company has also been facing troubles in innerwear segment due to intense competition and soft brick-and-mortar performance. These factors, along with impacts from the bankruptcy of Sears Canada, compelled management to trim sales and earnings outlook for 2017. The curtailed view weighed upon investors’ optimism, who have long been troubled by the tough scenario in the apparel space. Shares of the company have declined 16.3% in the past three months, underperforming the industry’s 6.3% rally.

Final Thoughts

We expect this Zacks Rank #3 (Hold) company to counter weak domestic business scenario through advancements in international segment. The positive synergies from strategic acquisitions and steadily expanding online sales platform are also expected to uplift price performance in the upcoming periods.

Do Consumer Discretionary Stocks Interest You? Check These

Investors interested in the same sector may also consider stocks such as Michael Kors Holdings Limited KORS, Deckers Outdoor Corporation DECK and Ralph Lauren Corporation RL. While Ralph Lauren and Deckers Outdoor sport a Zacks rank #1 (Strong Buy), Michael Kors carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ralph Lauren came up with an average positive earnings surprise of 11.6% in the trailing four quarters. It has a long-term earnings growth rate of 15%.

Deckers Outdoor Corporation pulled off an average positive earnings surprise of 88.3% in the trailing four quarters. It has a long-term earnings growth rate of 10.7%.

Michael Kors delivered an average positive earnings surprise of 23.7% in the trailing four quarters. It has a long-term earnings growth rate of 7.5%.

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