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Spin-off Hits Hanesbrands’ Net

Hanesbrands Inc. said Thursday that third-quarter income dropped because of costs associated with the firm's spin-off, but sales increased.

Hanesbrands Inc. said Thursday that third-quarter income dropped because of costs associated with the firm’s spin-off, but sales increased.

For the three months ended Sept. 29, income fell 22.7 percent to $38.9 million, or 40 cents a diluted share, from $50.3 million, or 52 cents, in the same year-ago quarter. Sales gained 3.1 percent to $1.15 billion from $1.11 billion.

For the nine months, the company said income declined 58.6 percent to $76.3 million, or 79 cents, from $184.2 million, or $1.91, a share. Sales inched up 1.3 percent to $3.32 billion from $3.27 billion.

The company said the third-quarter loss was caused by higher interest expenses associated with the company’s independent structure after its spin-off from Sara Lee Corp. in September 2006.

“Since our spin-off, we have increased sales, expanded our margins, and strengthened our balance sheet,” Richard A. Noll, chief executive officer, said in a statement. “Our strategic initiatives of investing in our brands, reducing costs and driving cash generation are creating value and positioning us to achieve our long-term growth goals.”

The company said for both reporting periods, outerwear sales posted strong growth, and sales of its largest segment, intimate apparel, had declined. Strong outerwear volume was boosted by sales of Hanes brand casualwear and Champion brand activewear.

Hanesbrands acquired an offshore textile plant in El Salvador in August, and also selected Nanjing, China, as the site to build its first textile production plant in Asia.

The company said in the third quarter it substantially completed the separation of its pension plan assets and liabilities from its former parent, adding that its plans are 97 percent funded.

This story first appeared in the October 26, 2007 issue of WWD.  Subscribe Today.