Hanesbrands Shares Changehands—Shares down 14%

-By Josh S | [email protected]

Hanesbrands, the company which produces innerwear and activewear, reported third quarter results on November 1st. Innerwear represented 43% of sales in Hanes 2016 year while Activewear represented 26% of sales. The company also has a direct to consumer segment, which represented 5% of sales, and international representing 26% of sales.

The company said Q3 net sales increased 2% and GAAP EPS increased 22% while adjusted EPS of 60 cents increased 7%. The company said it " returned to organic growth in the quarter as International results were stronger than expected." The company, also, said it expected to achieve organic growth in Q4. Importantly, the company's online division continues to soar—digital Online Sales Growth saw revenue increase in the high 20's and, now, represents 9% of total sales.

Hanes updated guidance suggests that cash from operations will meet or exceed the midpoint of its guidance; it also said adjusted EPS would be $1.93 to $1.95. However, this is a reduction from Q4 of 2016 when the company said it would record adjusted EPS of $1.93 to $2.03—some of this drag is due to the bankruptcy of Sears Canada. Hanes said organic revenue would increase by 3% in Q4. The company recorded $22 M of amortization of intangible expense last year, but amortization costs were already $23.6 M for the first 9 months of 2017.

The company announced the acquisition of Alternative Apparel in mid-Ocotber. The company believes this acquisition will have an IRR of at least 20%. The company believes this acquisition and other will help it deliver profit and cash flow growth going forward.

Enthusiastically, Hanes believes it has reached an inflection point in its business that will allow for sustained organic growth. The stock currently trades at a price to earnings multiple of approximately 10 based on its guidance. The company has negative tangible equity of -1.2 B or approximately $3.66 a share.

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