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I have been reading over the latest earnings report and listening to the conference call of Hanesbrands (NYSE:HBI) (my 2nd largest holding) and continue to be extremely impressed with the quality of the management team and their ability to continue to deliver on their program of restructuring the company after their spin-off from Sara Lee last year. Hanes was saddled after the spin-off with over $2.5 billion of debt, a highly underfunded pension plan and a higher than typical cost structure. Hanesbrands has used the significant cash flows that the company earns each quarter to bring the pension fund to a level of being 96% funded, is steadily bringing down debt (they paid down $75 million just this last quarter) and has been restructuring operations by consolidating plants and moving facilities to lower-cost areas.

The earnings themselves were fine although I am not overly concerned with quarter to quarter earnings but I rather look closely at the trends in margins, cash flows, ROIC and on the company showing that they can deliver on their promises (I have an explanation of my expectations in my full write up for subscribers which has a link below).

I do not know how this stock will do in the short term but so long as the company continues to execute on their strategy of cutting costs, lowering debt levels, repurchasing shares of stock and increasing the sales of the higher margin products, then the stock should do very well over the long term.

For a full analysis on my thoughts of the company (including its potential as well as some of the risks) you can click here.

Source: Hanesbrands Continues To Pay Down Debt