Maidenform Innerwear sales  were up 20% in the quarter

Maidenform Innerwear sales were up 20% in the quarter

Nearly four months in, and it’s fair to say that Hanesbrands chairman and CEO Rich Noll has no regrets over the company’s US$581m acquisition of Maidenform in October last year.

“We’ve now owned it for about 120 days, so we’re intimately involved in the business,” he told analysts after announcing Hanesbrands’ fourth quarter and full-year results.

“And it is crystal-clear that the strategic rationale for this acquisition remains very compelling.”

The figures for the fourth quarter to 28 December tell their own story: company sales up 12%, of which 9% was contributed by Maidenform, plus a healthy rise in profits once you factor out the $80m of charges associated with the acquisition.

The Maidenform effect was most noticeable in Innerwear, where fourth-quarter sales were up 20% (but only 5% for the full year), thanks to double-digit revenue increases for socks and panties, high single-digit rises for men’s socks, and mid-single digit increases for bras.

But Hanesbrands also highlighted market share gains for Hanes ComfortBlend socks and men’s underwear, Hanes X-Temp underwear and Smart Size bras.

Activewear – previously called Outerwear – was less buoyant, with revenues only inching up by 1% in quarter and year, although the company flagged up a full-year operating margin figure of 13.1% and strong performances from Champion activewear and Gear for Sports.

And currency considerations masked growth in the company’s international business, where operating profit was up only 1% in the fourth quarter, and flat for the full year.

However, international sales at constant currency rose 10% in the fourth quarter and 7% in the full year, Hanesbrands pointed out.

Meanwhile, direct-to-consumer revenues were up 14% in the quarter and 2% in the year, with operating profit rising 31% and 34% in the respective periods.

Hanesbrands expects the full synergies from the Maidenform acquisition to be realised in the next three years, with the new buy contributing more than $500m a year in net sales, $80m in operating profit and $0.60 in earnings per share.

Cost of goods savings are expected from the integration of Maidenform’s 100% sourced production model with Hanesbrands’ mainly self-owned manufacturing base, supplemented by sourcing.

On top of this, the company’s back office functions – sales and marketing, supply chain and distribution/logistics – will be integrated, with Maidenform’s New Jersey headquarters and North Carolina distribution centre slated for closure by the end of 2014.

Hanesbrands expects the majority of corporate selling, general and administration (SG&A) savings to kick in by mid-2014, with the benefits of supply chain actions to cost of goods starting in 2015, and fully realised in 2016.

Meanwhile, complementary revenue opportunities are expected to deliver benefits in 2015, with the majority of benefits following in 2016.

If Hanesbrands is bullish about the Maidenform acquisition, it can’t disguise the continuing challenges in the US apparel market, and the fragility of consumer confidence.

“Inherent in our guidance is we are expecting this choppy consumer spending environment to continue,” said Noll.

“And when you tease it out and take out Maidenform, you’ll see we’re actually talking about our core business being up about 1.5 points and, actually, we’re reflecting that sort of choppiness, I think, in that guidance.”

Noll said he was getting “mixed signals” from the marketplace at the moment, with the Federal Reserve making positive noises and other areas of consumer spending doing well.

But he added: “You’re hearing isolated instances about certain retailers having traffic issues,” before returning to a positive tone: “The great thing about our business and our categories is that people buy our products and wear our products every single day of their lives, and they’re going to continue to buy them over the long term, and that’s why we feel really good about being able to navigate a relatively choppy environment.”