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Cotton Costs Impact Hanesbrands’ Bottom Line

The company may have been dragged into the red for the first quarter, but it beat analyst estimates and said the worst had passed.

Higher cotton costs helped drag Hanesbrands Inc. into the red for the first quarter, but the company beat analyst estimates and said the worst had passed.

Net losses totaled $26.8 million, or 27 cents a share, and compared with year-ago earnings of $48.1 million, or 49 cents. Analysts expected the company to post slightly steeper losses of 33 cents a share.

Sales for the three months ended March 31 decreased 2.7 percent to $1.01 billion from $1.04 billion a year earlier. Sales in the innerwear division inched up 1.3 percent to $509 million, while outerwear sales fell 9.2 percent to $294.2 million.

The company’s screen-print imagewear division accounted for losses of 18 cents a share. Hanesbrands is trying to give the division a more branded orientation as it moves away from the promotional side of the business.

“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 Noll, chairman and chief executive officer, of the overall company. “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.”

Hanesbrands said its cotton prices are locked in through December and confirmed its 2012 guidance projecting earnings per share of $2.50 to $2.60 on 2 percent to 4 percent sales growth.