HanesBrands, Winston-Salem, this week reported financial results for the first quarter ended March 31, 2012. The company had a net loss for the quarter of $0.27 per diluted share, and net sales of $1.01 billion, a decrease of 3 percent compared with $1.04 billion a year ago. The results were better than the company’s guidance for an EPS loss of up to $0.35 and net sales of approximately $1 billion.
“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 Richard A Noll, chairman and chief executive officer for Hanes. “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.”
Several of the company’s product categories, especially those that sustained the largest price increases to offset cotton inflation, generated solid sales growth and better than expected retail point-of-sale growth in the quarter. However, the Outerwear segment, which includes promotional products branch Hanes Imagewear, saw substantial losses The company had an overall 9 percent decrease in Outerwear sales, the largest percentage and cash decrease across all sectors. Sales were $294,194,000, down $29 million over the same quarter in 2011.
The company attributed a majority of the sales decline to its Hanes Imagewear business. Excluding the promotional segment, Outerwear sales for the quarter actually increased 4 percent on the back of Champion activewear sales and other retail business. The imagewear loss in the quarter was the equivalent of $0.18 per share, and the company continues to expect a full-year imagewear loss of approximately $0.30. As Promo Marketing first reported in February, the company said it is ahead of its plan to reposition domestic imagewear to focus on branded product categories and de-emphasize the highly promotional sector, which is expected to result in a smaller, more profitable and less volatile operation in the longer term.
“We’ve made good progress repositioning our U.S. Imagewear to focus more on branded sectors and de-emphasized the low end commodity segments,” Noll said in a conference call yesterday, adding that “the operating losses associated with Imagewear are now behind us.”
As anticipated, cotton inflation also negatively affected margins in the quarter, as did supply chain actions of $13 million to balance capacity with unit demand. Supply chain operations are performing well, and continued optimization is expected to yield substantial cost savings. The company continues to expect full-year free cash flow in the range of $400 million to $500 million.
The full first-quarter 2012 report is available on HanesBrands’ website.
