Hanesbrands purchase of TNF Group a strategic international move, says Professor Mike Lord

5.5.2011 Article, Faculty News, Retail

Hanesbrands buys Australian apparel distributor for $9 million

Reposted from Winston-Salem Journal | by Richard Craver

Hanesbrands Inc. said Wednesday that it has bought an Australian apparel distributor for $9 million to expand the reach of its Champion brand in Asia.

TNF Group Pty Ltd., based in Scoresby, Victoria, already had been selling and distributing Champion apparel in Australia and New Zealand under a licensing agreement.

TNF had a combined $20 million in activewear sales in 2010, according to Hanesbrands. About 60 employees will join the company as part of the deal. Hanesbrands said the TNF deal also is expected to expand its outerwear sales in Australia.

TNF sells activewear and sportswear to sports and retail stores under the Leluu, Performax, and Track N Field brands. It also sells custom sports clothing to Australian private schools and operates three retail stores.

It is Hanesbrands' first international commercial deal since its spinoff from Sara Lee Corp. in September 2006. In contrast, it has bought four international manufacturing plants or operations — two in El Salvador and one each in Honduras and Thailand.

Hanesbrands has had significant early financial success with its first domestic commercial deal, Gear For Sports, which it bought in November. Gear For Sports sells licensed logo apparel in collegiate bookstores and other channels.

Although Hanesbrands' international sales are a distant third in segment sales behind innerwear and outerwear, they did represent $127 million in revenue in the first quarter — up 23.6 percent from a year ago. The operating profit was up 86 percent to $20.2 million.

The company said its international goals have been focused on driving sales of basic and intimate apparel and activewear in Asia and the Americas.

"Our accelerating international growth is duplicating our success in the United States by increasing market share through strong consumer brands in core categories supported by our low-cost global supply chain," said Richard Noll, the chairman and chief executive of Hanesbrands.

"This model should allow us to sustain substantial international growth for years."

Analysts said that while the TNF deal is small in terms of purchase cost, it represents a sign that Hanesbrands wants to control the sale and distribution of its brands internationally.

Peter Tourtellot, managing director of Anderson Bauman Tourtellot Vos & Co., a turnaround-management company, said he expects Hanesbrands to make more of these deals if opportunities arise that make sense from a revenue and earnings perspective.

"I would expect that this transaction will have a positive impact to their international results in 2012 and 2013," Tourtellot said.

Michael Lord, an associate professor of strategy and entrepreneurship at Wake Forest University, said the deal brings relatively low risk, both financially and organizationally.

"The TNF acquisition seems like a clear move to consolidate their assets abroad in order to support further, and more strategic, international expansion," Lord said.