Summary
For those of you who read my write-up (Buy Carrier Global As Potential Asset Sales Will Reduce Debt (NYSE:CARR)) on Carrier Global (CARR), I started the write-up with a very simple statement: Labels matter. Labels matter for Carrier Global as it is a Global HVAC company with exposure to Fire & Security and some compared Carrier Global to traditional HVAC companies; however, its true peer is Johnson Controls (JCI). The same statement, i.e. labels matter, applies to Hanesbrands Inc. (NYSE:HBI) as well. You may think of Hanesbrands as an “underwear” company, but there is a hidden asset underneath the surface; that asset is Champion. Champion is the “crown jewel” of Hanesbrands as it not only is growing rapidly, but also generates operating profit margins higher than Hanesbrands’ overall operating profit margins. Moreover, there is a catalyst, a turnaround was underway in its innerwear segment prior to Corona. Buy Hanesbrands for the growth in Champion and the turnaround that’s emerging in its innerwear division.
Overview
I may be dating myself, but who doesn’t remember the Hanesbrands commercials with Michael Jordan as their spokesperson (Hanes michael jordan commercial) and (Hanes - Tagless (Michael Jordan commercial)). Back in the day, they introduced the term “bacon neck” and new product innovations such as “tag-less” underwear and t-shirts. A lot has changed since then and, a lot has changed within Hanesbrands when they were spun out of the former Sara Lee in September 2006. Through both inorganic and organic growth, Hanesbrands is a global player in the “innerwear” and “active wear” markets generating 36% of their revenue outside of the United States.
However, over the past five years, Hanesbrands’ stock price dropped close to 70%! Over that same timeframe, revenue grew 5%, adjusted Earnings Before Interest Taxes and Amortization (EBITA) grew 3%, Free Cash Flow grew 53% and pre-tax Returns on Invested Capital (("ROIC")) remained relatively
