Buffeted by soft innerwear sales and an array of charges due to its September spin-off from Sara Lee, Hanesbrands watched its profits drop by more than three-quarters during the three months ended 30 December.

The Winston-Salem, North Carolina-based marketer of brands including Hanes, Champion and Playtex reported the quarter in tandem with those of the six-month period and compared them with those of the same units during their inclusion with of Sara Lee. Henceforth, Hanesbrands' fiscal year will end in December.

Net income for the quarter dropped 77.6% to US$23.8m, or 25 cents a diluted share, from $106m, or $1.10, during the prior year. Plant closings cost the company $18.8m in charges and the spin-off exacted a $9m effect, but these were offset by a $28.6m gain from the curtailment of post-retirement benefits.

Net sales declined 4.3% to $1.13bn from $1.18bn during the quarter. The company's innerwear business, by far its largest component, declined 5.9% to $644.7m from $685.2m.

Gross profit as a percentage of sales declined to 31.3% from 33.3% a year ago.

"In the December quarter, we saw slower sell-through of innerwear products in the mass merchandise and department store retail channels, although we did not experience these issues in the mid-tier channel," said Richard Noll, chief executive officer.

The company also noted that revenues were pulled down by the "intentional discontinuance of low-margin product lines in the outerwear segment."

The company won't provide quarterly or annual earnings guidance, but it did reiterate its long-term goals of 1% to 3% annual growth in revenues, excluding acquisitions; 6% to 8% annual growth in operating profit, excluding special items; and double-digit growth in diluted earnings per share, again excluding special items.
By Arnold J Karr.