Inside Champion's new NYC store.

Hanesbrands Inc. took a $14 million bad-debt charge connected to the Sears Holdings Corp. bankruptcy for the third quarter ended Sept. 29.

The basic apparel-maker said Thursday that net income for the quarter slipped 15.7 percent to $171.4 million, or 47 cents a diluted share, from $203.4 million, or 56 cents, a year ago. Net sales rose 2.7 percent to $1.85 billion from $1.8 billion.

Operating profit of $257 million for the three months fell 1 percent due to the bad-debt charge. On adjusted basis that includes the exclusion of the charge, operating profit for the quarter rose 6 percent to $292 million, while adjusted earnings per share were 55 cents.

Investors weren’t happy with the results. While adjusted EPS met analysts’ consensus estimate of 55 cents, sales at $1.85 billion missed Wall Street’s expectations of $1.87 billion. Investors sent shares of Hanesbrands down 5.5 percent to close at $16.22 in trading on the New York Stock Exchange Wednesday.

Gerald W. Evans Jr., chief executive officer, said, “Our overall results were good and in line with our guidance on a pro forma basis. We made progress on our long-term goals of continued organic sales growth, higher profit margins and reduced debt leverage.” The ceo added that the company is “off to a strong start” for the fourth quarter “with solid order bookings across our segments.”

Evans highlighted third-quarter global growth of its Champion brand outside the mass channel at up 40 percent on a constant currency basis, noting that demand is expected to remain strong. While innerwear sales were lower than expected, “consumer demand was strong and we believe that continued underlying strength supports our outlook for improvement. The ceo told analysts during a conference call that U.S. innerwear sales fell 7 percent, below the company’s outlook for a 1 to 2 percent decline. He described the results for the category as “frustrating,” noting that replenishment orders lagged even though the company experienced some of its “strongest point-of-sales across our categories that we’ve seen in years.”

The company also said it used its free-cash generation to pay down debt by $115 million in the quarter, which lowered its debt leverage to 3.8 times on a net debt-to-EBITDA basis.

Hanesbrands said it expects full-year 2018 net sales to be in the range of $6.74 billion to $6.78 billion, and adjusted EPS of between $1.69 to $1.73. The EPS guidance includes a negative impact of 5 cents due to the Sears bankruptcy. The company also said that due to the Sears bankruptcy filing, it is presuming “no sales or profit contribution in the fourth quarter from Sears.” Total year-to-date company sales contribution from Sears was 1 percent. Ceo Barry A. Hytinen said during the call to analysts that before the bankruptcy filing, it had expected fourth-quarter sales contribution of $15 million from Sears. He said the company also lowered its operating profit forecast by $5 million.

For the fourth quarter, the company guided net sales to range between $1.70 billion to $1.74 billion, representing about a 5 percent growth rate from a year ago. The quarter’s adjusted EPS, excluding the bad-debt charge, is expected to range between 46 cents to 50 cents.

load comments
blog comments powered by Disqus