Quiet Confidence in HanesBrands Earnings

Today HanesBrands (HBI) reported its 1Q 2008 results.

• Sales down 5% to $987.8 million from $1.04 billion in 1Q 2007
• International sales up 15% to $104.64 million from $90.78 million in 1Q 2007
• Cost of sales $642.88 million from $700.22 million in 1Q 2007
• Gross profit margin 34.9% from 32.7% in 1Q 2007
• Net income up 200.1% to $36.02 million ($0.38 per share) from $12 million ($0.12 per share) in 1Q 2007
• Profit margin 3.65% from 1.14% in 1Q 2007
• Diluted share count 95,610,000
• Company repurchased $8.3 million worth of shares (334,980 shares) in 1Q 2008
• Cash $120.79 million

Press Release

Analysts were expecting an EPS of $0.33 on sales of $1.05 billion. So, Hanesbrands managed to beat EPS estimates but slightly missed sales estimates.

I think this was a very impressive quarter, but we'll need to wait and see what the final picture is for cash flow and balance sheet numbers. Lower interest expense due to lower debt was part of the reason for the increase in earnings, so HBI most likely did continue paying down debt this quarter.

It's important to remember that the company is still in a turnaround stage (coming out of it, but still in one) and we're not in easy country right now. One thing I'm not particularly happy about is the stock buyback. As we've seen with Select Comfort, buying back stock can be a nice idea but it can turn deadly if you get carried away. HanesBrands is purchasing pretty modest but still noticeable amounts, so I'm not too concerned. As long as they keep paying off debt (which should be top priority right now) and reinvesting in the business first, buying back some shares is fine with me.

HanesBrands is a very interesting business story and I feel comfortable investing in the company. Management does not fret about short-term results or speculation, it adjusts and makes the best of the situation while focusing on long-term results. All but one segment of the company saw sales go down this quarter, that one being international sales. International sales were boosted up a decent amount, partly because of the lower dollar and favorable currency rates as well as growth there in general. It's good to know that HanesBrands does have some exposure to the benefits of a lower dollar, but it's not enough yet to have much of an impact of overall sales.

Anyway, this seems like a successful quarter (I believe it to be) and management continues to improve results and focus on the long run. I remain confident in HanesBrands and I think the company does indeed have a bright future. Management is cost-cutting and improving efficiency, and I believe there is still plenty of this that can be done, so we should see some good margins this year. For the 2Q 2008, analysts are expecting an EPS of $0.65 on sales of $1.14 billion.

Disclosure: Author is long HBI.

Comments

[Dan Weiss]

I agree that the earnings report was an overall positive. They were affected mildly by the economic slowdown but lower interest rates ended up offsetting any harm from slower sales. Looking forward, as the economy improves Id expect greater leverage to come from earnings growth thus enabling more rapid bottom line growth. The company is still likely to report a strong free cash flow (CFO was positive based on their conference call) and of course any improvement in consumer confidence would be a net positive even with many of their products being more of a consumer staple.

[Jamie Pruden]

I have to agree with Daniel on this one. I recently had an interesting talk with our broker about HBI and his numbers projected an average 22% growth over the next 5 years. I think this bears out in the marketplace as the Hanes brand is focussed on lower cost items that I think will be larger sellers over the next few years as we tighten our belt to pay for fuel.

[ouvriers cdapparel]

NOTE : FRANTZ PILORGE AND REGINALD BAKER ARE OWNER OF CD APPAREL S.A IN HAITI OF MORE, CONTRACTORS OF SARALEE/ HANESBRANDS [HBI] THEREFORE, THE HAVE GOT A DIRECT CONTRACT WITH THIS AMARICAN COMPANY [HANESBRANDS] THAT MEANS : SO WHEN AN INTERNATIONAL COMPANY GET DIRECT CONTRACT WITH AN OWNER IN ANY COUNTRY THE INTERNATIONAL SOCIAL LEGISLATION AND THE CODE OF CONDUCT ABOUT WORK MAKE OBLIGATION TO THE DIRECTION OF THE COMPANY AFTER THE CLOSING OF ANY PLANT TO DAMAGE AND REPAIR THE EMPLOYEES .IT'S FOR THAT THE WORKERS OF CD APPAREL S.A [PLANT NAME, HG] IN HAITI INVITE THE PRINCIPAL OF TRADE UNION ORGANISATION, THE RESPONSIBLES OF PROTECTION AND HUMAN RIGHTS, THE LAWER'S MEN AND THE LEADERS OF SARALEE/ HANESBRANDS [HBI] TO COME INTO HAITI AT SONAPI INDUSTRIAL PARK OF TOUSSAINT LOUVERTURE AVENUE BUILDING # 31 TO MEET WITH THE WORKERS SO THAT THIS CRISIS COULD BE UNLOCK . DO NOT FORGET THAT THE LEADERS OF HANES GET DAMAGED THE EMPLOYEES OF DOMINICAN REPUBLIC, PUERTO- RICO, MEXICO, CANADA AND U.S.A ETC... FOR WHAT NOT THE HAITIAN'S EMPLOYEES AT CD APPAREL S.A . BY THIS FACT IF HANES CONTINUE REFUSING TO DAMAGE THE WORKERS EVERY BODY CAN CONSIDERS THIS ACTION LIKE BEING OF EXPLOITATION, CRIMINAL, ABUSING, RACE DISCRIMINATION , INJUSTICE OR BECAUSE OF THE WORKERS ARE THE BLACK PEOPLE . TO NOT THAT CD APPAREL S.A [HG] IS CERTIFIED BY WRAP ORGANISATION AS A PLANT OR ENTERPRISE IN HAITI LEGITIMATE AND LEGAL TO BE WORKING FOR SARALEE/ HANESBRANDS [HBI] AND THEN THE CERTIFICATION NUMBER FOR CD APPAREL S.A IS 5382 . TO REMIND THAT CD APPAREL S.A HAS BEEN AND STILL LIVES THE NUMBER ONE FROM ALL OF PLANT PRODUCING BETTER AND GIVING THE BEST EFFICIENCY ABOUT PRODUCTION AND QUALITY IT'S FOR SO THIS PLANT IN HAITI CONSIDERED TOWARDS THEIR EYES LIKE BEEING THE BEST IN THE CARIBBEAN . ALL PEOPLE CAN VERIFY THIS INFORMATION IN THE YEARBOOK OF SARALEE / HANESBRANDS . IF IT'S SO ACCORDING TO THE LEADERS OF HANESBRANDS [HBI] THEY HAVE TO FIXE THEIR POSITION SO THAT THE RESPONSIBLES OF HUMAN RIGHTS, THE TRADE UNION ORGANISATION AND THE LAWER'S MEN COULD TAKE ACTION ON THIS BAD SITUATION AGAINST THE POOR HAITIAN WORKERS. GOD BLESSES THE WORKERS IN THE WORLD!!!

[ouvriers cdapparel]

The objective of our walkout towards consists of you it's to inform you of a position criticizes that we lived in Haiti, we the workers victims of the CD APPAREL S.A since May 4, 2007 this is that: FRANTZ PILORGE [owner of the cd apparel] of complicity with the private sector Haiti, the middle class haitian and the leaders of hanes [HBI] do all to maintain the workers in discrimination and the misery after the brutal closing and illegal of the plant CD APPAREL by Hanes without previous notice, refuse of us damage and repair. Of more FRANTZ PILORGE informed the workers than Hanes does not want to pay the workers by motive of racial discrimination and the color question, and course the workers are black haitian of more, he says, that to every closing of a plant, the persons in charge of Hanes do themselves always the duty of damage and pay charge to all of employees according to the requirement of the social international legislation of the work and the CODE OF CONDUCT from Hanes Therefore, PILORGE says if Hanes does not want repair the workers of cd apparel in Haiti this is a crime against humanity and a flagrant violation of the right of the workers. For more of informations, we invite yourself to click on these links. We are at sonapi, parc industial # 31. in here the address of our lawyer/ attorney : 509/34297129; 509/37548022; 22133089.We already get informed all People in the World by that means: The Trade Union Organisation , the ResponsiBles of Human Right ,the Social Group and the Lawer's Men, if the Leaders of Saralee / Hanesbrands [Hbi] could take an other way different than the only one to damage the poor Haitian Workers to take note against them and sentence that nasty action against the protection and the Right of the Workers in the World . In sum Pilorge and Reginald Baker note for example Hanes pays charges and damage the employees of D.R, Puerto Rico; Mexico; Canada and the U.S.A Plant for what according to him Hanes refuse to dame the workers of CD APPAREL S.A [HG] for this : The responsibles of human right and the lawer’s men must demand to the responsibles of Hanes to pay the workers after 4 years of excellent works for the company Hanes !!! HE TERMINATES BY TELLING THAT THE LEADERS OF HANESBRANDS EXPLOIT THE POORS HAITIANS WORKERS [SAYS FRANTZ PILORGE ]

[ouvriers cdapparel]

WE, THE EMPLOYEES OF CD APPAREL IN HAITI AT SONAPI INDUSTRIAL PARC # 31 LET SHOW TO ALL OVER IN THE WORLD : THE LOGO, CARTON , MOON WORKS FOR THE COMPANY SARALEE/ HANESBRANDS [HBI] AFTER 4 YEARS OF EXCELLENT JOB FOR THEM . THEY REFUSE TO REPAIR US AS THE COMPANY HAS BEEN ALREADY DOING IT FOR ANY PLANT THAT SHE CLOSES IN ANY COUNTRY.SINCE MAI 4 2007 , FRANTZ PILORGE USED THE WORKERS VERY BADLY WITHOUT MONEY AND SAYS TO HANES THAT HE GET PAID FULL COMPENSATION HE LIES ! HE LIES ! HE LIES ! IT'S FOR SO THAT WE INVITE THE RESPONSIBLES OF HUMAN RIGHTS TO COME IN HAITI TO DO THE LIGHT ON THIS CRISIS !!! AS PILORGE SAYS THAT HE IS WILLING TO FORGE THE RESPONSIBLES OF HANES TO DAMAGE THE WORKERS BECAUSE THE WAY FROM HANES TO CLOSE CD APPAREL [HG] HAS BEEN BRUTAL AND ILLEGAL BUT THEY REFUSE TO DO IT AS RICHARD NOLL AND GERALD EVANS GET DONE IT FOR EACH PLANT CLOSED IN ANY COUNTRY . FOR THAT PILORGE FRANTZ PUSH THE WORKERS TO FIGHT HANES UNTIL THE VICTORY CAUSE THE ACT OF HANES IS A DISCRIMATION AND CRIMINAL !!! GOD BLESSES THE WORKERS IN THE WORLD ! ... WE KEEP SINCE 4 MAI 2007 : 6 CONTENERS OF FINISHED GOOD, LOGO OF HANES, 2 CONTENERS CARTONS, 480.000 PIECES T- SHIRTS, MACHINES WITHOUT FORGETING MOON WORK LOTS IN DEVIATION FOR SARALEE !!! YOU HAVE TO KNOW THAT FRANTZ PILORGE LET US UNDERSTAND WHAT ALL OF YOU ARE MERCHANT CRIMINAL MAKING DISCRIMINATION AGAINST HAITI'S WORKERS SO, HE GET WILLING TO DEMAND YOU PAYING THE WORKERS BUT YOU REFUSE .BY THIS ACT HE CONSIDERS THAT IS VERY ABUSING AGAINST THE RIGHT AND PROTECTION OF THE WORKERS CAUSE THEY'RE EXPLOITING THE POOR HAITIANS WORKERS !!! DO NOT FORGET THE BRANDS AND STYLE OF T-SHIRTS THAT WE KEEP[BY HAITIAN LAW] FOR HANES [HBI] ARE : PRINTABLES, CASUAL WEAR, 5250, 5280, SM80, 5170. UNTIL WE GET DAMAGE AND REPAIRS ON HANESBRANDS !!! GOD BLESSES THE WORKERS IN THE WORLD !

[ouvriers cdapparel]

By the presente, we, the workers victims of the CD Apparel in Haiti want to attract the attention of the public opinion nationnal and international that the company Hanesbrands inc. (Hbi) is liveliness of itself in a manner disnonest defend when she declare that the work which is done in Haiti through internet by the workers is a companion of denigrement and of slander. By there, Hanes wants to hide the truth and destroy the light on the bad situation of the workers of the CD Apparel that itself caused for the decision to close in a manner brutal and illegal the CDApparel (HG) was taken by the persons in charge of Hanes May 4 2007 since this day more one than 500 workers are on the paved having Heavy responsibilities a lot money for bank and children to send to the school. They want to be damaged as all the others plants. We want sharply that the defenders of the human rights and the representants of the union organizations as well as the bosses of Hanes send their delegations in Haiti to CD Apparel s.a, Industrial Park (SONAPI) #31 in order to meet the workers for their information and to do the light on the question because carries it workers remained opened to all negotiation...
Greetings to all !!! 2-To the attention of the persons in charge of the company HANES Brands.
that already does more than four month than the workers have in their possession close to 480.000 T shirt without counting the materials and incidental such as: boxes, cartons, labels, machine etc; on which these is carried the logo of your company and with these logo one all can do without forgetting some lots of work which have been put in deviation. The haitian social legislation in his item gives legal provision to the workers to seize the goods, furnish and buildings while awaiting that the parties find a compromise that their permit of resolve the conflict. The code of conduct and the social legislation american done obligations to the company Hanes to compensate the workers of CD APPAREL as this some is the case for: Puerto Rico, Mexico, Canada, U.S.A and the last one in dates the Dominican republic. This is in this perspective that the workers victims of all the abuses ask Mr. Richard Noll Gérald Evens, E. The Wyatts etc of well to want to take conscience while returning in contact with their lawyer or the workers themselves for a modus operandi in order strength liberer the merchandise. So, the safe, fast and reliable way à be one, it's à get the workers because they leave opened their door for Hanes. Distinguished greetings. Me Jorice Orémil Lawyer of the workers of CD APPAREL in Haiti !!! 3-Responsibles of the Hanes brands,
The comitee of workers of CD Apparel, at building #31, parc industrial (sonapi) HAITI joins their lawer, Jorice Oremil to greet the differences national organization and international for their help and to their enterprise fight by the said workers realize to damages.
Note that the boss of CD Apparel Frantz Pilorge came in Haiti after some meetings with the leaders responsible of Hanes and he has made the workers know that the bosses of Hanes,such as : Richard noll, Gerald evens,Micheal Jordand ………
Are vampires who don’t cease to exploit the workers around the word.
Speaking of Haiti he make understand that the Haitians workers are victims of racial discrimination. This enterprise “CD Apparel” has been congratulated by the same leaders for its efficiency and it’s products without any others .
The Haitians bosses put themselves to the bosses of Hanes side to exploit more the poor Haitian workers .
Lots of companies around the wold have been compensated with discussion such as:
Dominican Republic :3millions dollars us
Porto-Rico =$18.000000 US
Mexico :=$ 27.000000US
Canada : big millions
USA : big millions
And Haitians workers suffer until now and the workers of this company are left to their own devices.
These workers can’t send their children to school , pay the rent not to say sanitary cares about fity thousand (50000) workers arrange themselves already for a strike which aims at two objectives:
1-Ask Hanes Brands to compensate the workers of CD Apparel
2-Ask the Haitian parliamentaries to note the law on minimum wage.
We, workers of the cd apparel let us learn that some bosses of the company Hanes Brands such as: Richard Noll, Gerard Evens, Jorge Oliva from WRAP and others ally themselves with the haitians employers to know: the Bakers, the Apaids, and Richard Coles to prevent to the employees of CD Apparel to obtain their damages and repairs as Hanes does it always for the others plants.For your information, we say that :
Haitian government for the coming days will arrest certain other bosses for corruption and contreband , after the brandt , the Boulos , it will be the Baker’s and Richard Coles, the Apaid’s , Madsen, Acra, Meuz turn . This is the reason we want to ask the persons in charge of hanes to divorce with these employers in order not to to be considered as accomplice in the file of the workers of cd apparel because the state haitian [René Preval] will follow: authors and accomplices in this so national one as international file if hanes refuses, she will be considered as social danger for all the workers of the entire world.
We are waiting fo Hanes investigation in Haiti to release this crisis.
We write the American congress to take action to close the Hanes enterprises.
The workers of CD Apparel have been waiting and expecting that the leaders of Hanes will not shut the door in their face and will satisfy the workes