Professor Michael Lord believes innovation brought Hanesbrands profits

7.22.2010 Alumni News, Article, Retail

Hanesbrands says profits nearly tripled
Originally Posted on Thursday, July 22, 2010 | By Richard Craver
Reposted from The Winston-Salem Journal

Hanesbrands Inc.'s emphasis on increasing advertising and expanding its product mix with key customers continued to pay off in the second quarter.

The apparel company reported yesterday that it nearly tripled its profits to $85.4 million.

Diluted earnings were up 55 cents to 87 cents a share, although 20 cents of the increase was related to an income-tax-rate adjustment. The average earnings forecast was 67 cents by analysts surveyed by Zacks Investment Research.

Richard Noll, the chairman and chief executive of Hanesbrands, said that its brands "are performing well with consumers, helping drive share gains in core categories."

Matt Hall, a spokesman for Hanesbrands, said that the company successfully added new products and shelf space "with all major customers and all channels — dollar stores, mass merchants, mid-tier and department stores."

"By any measure, they have had a very successful quarter," said Peter Tourtellot, the managing director of Anderson Bauman Tourtellot Vos & Co., a turnaround-management company in Greensboro. "It appears they will continue the momentum up through year end."

Confident that its sales- and market-share gains are sustainable, Hanesbrands increased its full-year guidance on earnings for a second time this year, this time to a range of $2.25 to $2.35 a share compared with previous projections of $2.15 to $2.27.

The company said it will raise prices in the second half of the year to help offset higher cotton, energy and labor costs. "The timing and size of price increases will vary by product category. The majority of the pricing impact will begin in 2011," the company said.

Sales were up 9.3 percent to nearly $1.1 billion.

Innerwear sales were up 10 percent to $559.2 million, and outerwear sales were up 16.1 percent to $263.3 million. International sales rose 14 percent to $127.5 million. Direct-to-consumer sales were flat at $93.9 million, and hosiery sales were down 20.1 percent to $31.9 million.

Michael Lord, an associate professor of management at Wake Forest University, said that recent product introductions, such as Smart Size bras, "seem to be catching on and generating both new sales and greater profits."

"Men and women are willing to pay more and buy more often to get meaningful improvements in fit and function" in both innerwear and outerwear," Lord said. "Costs need to be watched, but right now they seem to be manageable, plus innovation helps Hanesbrands charge more."

Hanesbrands released its earnings report after the market closed yesterday. Its share price fell 9 cents to close at $24.94.