(Filed Under Financial and General Interest News). Innerwear segment sales at Hanesbrands fell by 5% in the second quarter, to $749.2 million from $786.4 million a year ago. Sales for the category are down for the first six months of the year, $1.31 billion compared to $1.34 billion in 2015.
Meanwhile, combined sales for Hanes, which has three additional segments (Activewear, Direct to Consumer and International), fell by only 3%, in the second quarter, to $1.47 billion from $1.52 billion a year ago. Profit, however, jumped to $128.1 million from $94.9 million.
Operating profit for Innerwear fell 11% in the quarter ended July 2, 2016, to $181.4 million from $202.0 million for the quarter ended July 4, 2015.
The company defines its Innerwear division as selling “basic branded products that are replenishment in nature under the product categories of men’s underwear, panties, children’s underwear, socks, hosiery and intimate apparel, which includes bras and shapewear.”
Despite the declines in Innerwear, Hanes officials found several reasons to be optimistic about the segment in the conference call with analysts to discuss the quarter. Gerald Evans Jr., the COO and CEO-elect noted that “the initiative that I laid out at the beginning of the year to drive volume growth in our core Innerwear business is gaining traction. For the quarter, we grew market share in men’s underwear, women’s panties and socks.”
Going forward, Evans emphasized he is optimistic about the company’s new Fresh IQ “odor control technology that mechanically attacks bacteria. This is a great innovation that we believe has the potential to impact the overall apparel category. In fact, we’ve seen some of our highest advertising testing ever with this new product. And the reception by our retailers has been strong. The benefits of Fresh IQ span both Innerwear and Activewear and it’s now in the market with men’s underwear, socks and certain Champion products.”
Richard Moss, the CFO, noted that the decline in Innerwear reversed at the end of the period. “Intra-quarter, the sales performance mirrored the broader retail environment with a soft April and May giving way to stronger June. In fact, our Innerwear sales were up 10% in the month of June with strength continuing into July.”
Evans provided an overview of Innerwear over the first six months of 2016, noting “in the first half of the year, it’s really performing as we expected. It was up nicely in Q1, up over one percentage point in Q1, and we expected it to be down in shipments in Q2 as we overlap the pretty substantial space gains that we experienced in our basics business in X-Temp last year.” He added, “As we look to the balance of the year and we execute our initiatives behind our focus on the core initiative, as well as we’re seeing sequentially improving trends in our bra business, we feel good that we’ll have very positive momentum along with now our new innovation in Fresh IQ in the Innerwear business as we look to the second half.”
Evans continued, “The bra business actually did show positive growth within the quarters. We overlapped our brand consolidation business. It was up mid single digits within the quarter. So, we see a positive trend in that business. As we look to the balance of the year, and we continue to see the power of our brand consolidation, we do believe there will be positive trend in the second half of that business as well. We see growth in two places, certainly in our – some of our key brands, such as Bali, we see solid growth, but also as you alluded to very much we’re seeing growth in that ComfortFlex Fit model, which is the blending of the active and the casual. The athleisure, if you will, the bras coming together and the Hanes business in particular is doing very well in that segment.” — NM
The complete transcript of the conference call can be found here: http://seekingalpha.com/article/3994866-hanesbrands-hbi-richard-noll-q2-2016-results-earnings-call-transcript
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