US: Hanesbrands sees Q3 profits rise
US clothing company HanesBrands saw third-quarter net income rise on the back of increasing sales and improving margins.
Net income rose 20.9% to reach US$109.89m over the quarter ended 29 September. Sales increased 2.8% to $1.2bn. Over the quarter, operating profit margin increased 60 basis points t o12.8% over the quarter. Selling, general and administrative expenses decreased as a percentage of net sales, mitigating the impact of higher cotton costs.
Innerwear sales increased 3% in the quarter, and operating profit rose 10%. Meanwhile outwear sales grew 5% as operating profit declined 4%, which the group attributed to higher cotton costs.
"We are executing well and had a very good quarter as reflected in our operating margin, free cash flow and EPS, all of which are all-time quarterly records," said chairman and CEO Richard Noll.
"Cotton inflation is behind us, and we are generating momentum for continued growth."
The company said it has finalised product pricing, shelf space and promotions for the remainder of the year with its major customers. Commodity costs have also been fixed for the remainder of the year, with the company recording significantly lower cotton and other inflation impacts for the remainder of the year.
Commenting on the results, BB&T Capital Markets analyst Scott Krasik said that sales are expected to accelerate to 4.5% in the fourth quarter.
"While HanesBrands has struggled to deliver much upside to sales guidance this year and it anniversaries price increases in Q4, easy comparisons due to massive destocking that took place in December last year and a clean inventory position at retail make us more comfortable with guidance. Managing near-term expectations, HanesBrands HBI suggested that if there is any upside to business in Q4, it would likely be reinvested in marketing implying minimal upside to the quarter."
He added that the company has begun discussions with retailers to negotiate next year's planned promotions and has established the majority of pricing in the innerwear segment.
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