HanesBrands continues to excel — but it might not be enough to tame investor fears.
HanesBrands’ stock fell more than 10 percent Thursday morning after the company alluded to the impact of store closures.
“Key assumptions in the company’s guidance include: a cautious outlook for the U.S. brick-and-mortar retail market, including the effect of door closures; continued progress in U.S. innerwear revitalization initiatives; price increases; negative effects of currency exchange rates; and increased marketing investment to support brand plans,” HanesBrands said in a statement.
However, the company updated guidance, raising the midpoint. It now expects sales this year of $6.94 billion to $6.99 billion, where as before it projected sales of $6.89 billion to $6.99 billion.
The intimates company, which produces men’s, women’s and children’s basics, including underwear, shapewear, socks, T-shirts, activewear and bras for women in brands like Hanes, Champion, Playtex, Bali, Maidenform, Just My Size and Bras N Things, among others, is still going strong.
Total sales for the third quarter ended Sept. 28 increased 1 percent to $1.87 billion. Net profits for the period were $187.7 million, up from $171.4 million the same time last year. Sales at the Champion brand were particularly strong, jumping 25 percent during the quarter thanks to consumers strong demand for the logo.
“We believe Champion is well-positioned to generate another billion dollars of growth over the next several years,” Gerald W. Evans, Jr., chief executive officer of HanesBrands, said on Thursday morning conference call with investors. “We see strong secular trends within the activewear category. [And] Champion’s brand equity scores are growing, particularly with Gen Z and Millennials.”
Maidenform, HanesBrands’ lingerie brand and the fourth largest company in the U.S. women’s intimates apparel market, according to Euromonitor International, also continues to grow. Evans said the recently launched maidenform.com is driving new users to the brand. And Bras N Things continues to do well internationally, in places like Australia, New Zealand and South Africa.
Even so, there have been some headwinds. A number of retailers have been shuttering stores in the last few years. Investors may be concerned that HanesBrands, which has more than 1,000 company-owned retail stores around the world in addition to its wholesale partners, will be impacted by the trend.
Chico’s FAS Inc., L Brands Inc.’s Victoria’s Secret, J.C. Penney Co. Inc., Avenue and Gap Inc. are just a few of the retailers that have announced store closures this year. Dressbarn, owned by Ascena Retail Group, announced Wednesday that all 544 of its remaining stores would be closed by Dec. 26.
While HanesBrands continues to be buoyed by the strength of its activewear business and the steadfast consumer thirst for ath-leisure, sales in the U.S. innerwear business, meanwhile, fell last quarter to $578.4 million, compared with $599.7 million the year prior.
Evans attributed the dip in the category to softer retail traffic during the quarter than expected and added that the company continues “to execute our strategy to return this business to growth.”
That includes innovations in the intimates category that the ceo said are gaining tractions, such as shapewear and new bras.
“We feel like the things we set out to accomplish in innerwear are going fine on the basics side,” Evans said. “On intimates, the intimates [category] came in once again and it has all year right where our expectations were. So we view this more as a short-term fluctuation than anything of significance to worry about.”