Shares of Hanesbrands Inc. soared 12.8 percent Thursday to $30.07, pushing past overall market woes thanks to second-quarter earnings that beat Wall Street's expectations.
Hanesbrands posted second-quarter net income of $25.4 million, or 26 cents a share. Excluding charges, the company earned $52.4 million, or 54 cents a share, which compares with $59.3 million, or 62 cents, in the prior year. Revenue was flat at $1.2 billion. Analysts expected the company to earn 20 cents a share on revenue of $1.14 billion. In the year-earlier period, Hanesbrands posted income of $59.3 million on revenue of $1.12 billion.
Hanesbrands chief executive officer Richard A. Noll said in a conference call that cost controls, globalization execution and consolidation led to the better-than-expected profit results. At the same time, Noll said Hanesbrands is ramping up significant investments in its largest brands, Hanes, Champion, Playtex and Bali, to increase awareness with retail partners that national brands drive traffic.
Hanesbrands, which markets innerwear, outerwear and hosiery under brand names Hanes, Champion, Playtex, Bali, Just My Size, Barely There and Wonderbra in both department stores and big-box retailers, spun off from Sara Lee Corp. in September. The company's 2007 second quarter marks Hanesbrands' third quarter as a stand-alone company.
Hanesbrands' flat quarterly sales fell slightly below Wall Street expectations.
"Our sales for the second quarter were relatively equal to last year in a tough consumer environment," Noll said on a conference call. "Our goal has been to solidify our sales base in 2007, and invest in our brands for growth in the future specifically to build our largest and strongest brands in core categories to innovation in key items."
BB&T Capital Markets analyst Eric Tracy said much of Thursday's upside came from Hanesbrands' ability to accelerate its restructuring.
"It demonstrates management's ability to execute on their plan," Tracy told WWD.
But Tracy noted that Hanesbrands' revenue is difficult to evaluate on a year-over-year level, as the company did not operate as an independent, public company in the year-earlier period.
"It's not apples to apples. It's not a top-line story. It's a mature market so its not a growth story," Tracy told WWD. "We view flattish to low-single-digit growth as on plan and a positive for this company."Tracy said Hanesbrands, which does not issue quarterly or annual guidance, set base expectations for the next three years of 1 to 3 percent sales growth, 6 to 8 percent earnings before interest and taxes growth and double-digit earnings growth — all of which he sees as "very achievable."
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