US: Hanesbrands' Q1 losses better-than-expected
Hanesbrands has recorded a better-than-expected first-quarter net loss as the basic apparel manufacturer increased prices to offset rising cotton costs.
The T-shirt and underwear maker swung to a US$26.8m net loss over the quarter ended 31 March, against a US$48.1m net profit in the same period of the prior year. Losses were $0.27 per share, better than the originally forecast losses of up to $0.35 due to the impact of outerwear issues and cotton inflation. Sales were down 3% to $1bn.
The company said several product categories, especially those that sustained the largest price increases to offset rising cotton costs, generated solid sales growth and better-than-expected retail point-of-sale growth.
Continued issues in the imagewear business significantly impacted results, with losses equivalent to $0.18 per share. The company expects full-year losses here to be $0.30 per share.
Hanesbrands is slightly ahead of its plan to refocus on branded product categories, and reduce emphasis on the highly promotional domestic imagewear sector. This should result in a smaller, more profitable and less volatile operation in the longer term.
Cotton inflation also hurt margins in the quarter, as did costs of $13m in the supply chain to balance capacity with unit demand. Supply chain operations are performing well, and continued optimisation is expected to yield substantial cost savings, the company said.
There is also good visibility on product pricing and costs for the remainder of the year. Product pricing has been confirmed with retailers for more than 95 % of the company's domestic unit volume. And cotton costs are locked in through December.
"We are tracking consistent with our expectations, and now with the worst of the cotton inflation behind us, our operating profit margin for the remainder of the year should average in the low double digits," said Hanes chairman and CEO Richard Noll.
"Sales, profits and cash flow are running consistent with, or better than, our plans. When coupled with the visibility of our pricing and costs for the rest of the year, we feel very good about our momentum and are confident in our ability to achieve our full-year financial goals."
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