QUOTE AND NEWS
Market Intelligence Center  May 22  Comment 
After Thursday’s trading in Hanesbrands (HBI) the algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center picked out a trade that offers a 3.65% or 9.06% (for comparison purposes only), while providing 7.09% downside...
Benzinga  May 15  Comment 
DA Davidson upgraded Hanesbrands Inc. (NYSE: HBI) from Buy to Neutral. The price target for Hanesbrands is set to $37. Hanesbrands shares have gained 51.28 percent over the past 52 weeks, while the S&P 500 index has surged 12.95 percent in...
Market Intelligence Center  May 7  Comment 
Option-trade picking algorithms patented by MarketIntelligenceCenter.com found a trading opportunity with Hanesbrands (HBI) that should provide a 4.49% return in just 162 days. Sell one Oct. '15 call at the $30.00 level for each 100 shares of...
Market Intelligence Center  Apr 27  Comment 
After Friday’s trading in Hanesbrands (HBI) the algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center picked out a trade that offers a 5.15% or 10.92% (for comparison purposes only), while providing 7.76% downside...
TheStreet.com  Apr 24  Comment 
NEW YORK (TheStreet) -- Shares of Hanesbrands were falling 7.2% to $32.10 on heavy trading volume Friday after the apparel company missed analysts' estimates for earnings and revenue in the first quarter. Hanesbrands reported earnings of 22...
Wall Street Journal  Apr 23  Comment 
Hanesbrands raised its full-year guidance to take into account its recent Knights Apparel acquisition but posted weaker-than-expected results for the first quarter.




 

Hanesbrands manufactures and sells of low-cost innerwear (t-shirts, bras, and underwear) and hosiery.[1] The companies brands include: Hanes, Champion, Playtex, Bali, L’eggs, Just My Size, barely there, Wonderbra, Stedman, Outer Banks, Zorba, Rinbros and Duofold.[2] The company sells its products at wholesale prices to mass-market discount retailers like Wal-Mart and Target, as well as department stores. Hanes is heavily dependent on a few large customers. Wal-Mart (WMT), Target (TGT), and Kohl's (KSS) account for 27%,17%, and 7% respectively, of the company's sales.[3]

Hanes is one of the largest players in the innerware industry and enjoys economies of scale that allow it to offer its products at prices below those its competitors. This advantage has become especially important in recent years, as department stores have begun to offer their own private label brands. Private label brands typically provide department stores with higher margins than third party brands. Hanes is the exception to this rule because it is able to offer its products at prices below what it costs department stores to manufacture/purchase their own private label merchandise. The company earned $3.9 billion in revenue and $51 million in net income in 2009.[4]

Once a subsidiary of Sara Lee, Hanes was spun off in 2006 as part of a restructuring within the parent company. Since the spin-off, Hanes has struggled with increasing operational costs, steady decreases in its hosiery business, and over $2B in debt.

Company Overview

Hanesbrands designs, manufactures, sources and sells a broad range of apparel essentials such as T-shirts, bras, panties, men’s underwear, kids’ underwear, casualwear, activewear, socks and hosiery.The company generates 89% of its sales from within the United States and 81% from wholesales to retailers.

Business Segments[5]

  • Innerwear - focuses on core apparel essentials, and consists of products such as women’s intimate apparel, men’s underwear, kids’ underwear, and socks.
  • Outerwear - focuses on casualwear and activewear markets through the Hanes, Champion , Just My Size and Duofold brands, where the company offer products such as T-shirts and fleece.
  • Hosiery - the company is the largest market of women's sheer hosiery in the United States. The company markets hosiery products under its L’eggs, Hanes and Just My Size brands.
  • Direct to Customer - operations include our value-based (“outlet”) stores and Internet operations.
  • International - includes products that span across the Innerwear, Outerwear and Hosiery reportable segments and are primarily marketed under the Hanes, Champion, Wonderbra, Playtex, Stedman, Zorba, Rinbros, Kendall, Sol y Oro, Bali and Ritmo brands.
  • Other - primarily consists of sales of yarn to third parties in the United States and Latin America.

Business Growth

FY 2009 (ended January 2, 2010)[4]

  • Net sales fell 8% to $3.9 billion. The company attributes lower sales to the sluggish economy. Innerwear, Outerwear, Hosiery and International segment net sales were lower by 6%, 12%, 15%, and 12%, respectively.
  • Net income fell 60% to $51 million.

Trends and Forces

Department Store Consolidation

Department stores in the United States have undergone significant changes in response to declining margins. Stores have implemented tighter inventory controls and have scaled back the quantities of merchandise that they purchase from companies like Hanesbrands.

Besides competing with other major brands for department store business, Hanesbrands has to contend with the rise of private label merchandise as well. As private labels become an increasing part of department store sales, big companies may scale back on the traditional brands they order from companies like Hanesbrands. Although traditional brands will remain a vital part of the department store business, they have a strong incentive to prefer private labels wherever possible because they can be sold at higher margins than outside brands. As the low-cost undergarment industry is essentially commoditized (with cost being the biggest factor for consumers), companies have an even stronger incentive than is usual to create and sell private label undershirts and intimate apparel to keep costs low and margins high. However, Hanesbrands serves as a key exception to this trend: as a very large company that manufactures its own clothing, it can often price its product below private label merchandise.

In addition, a series of mergers and acquisitions in the industry (e.g. Macy’s takeover of Marshall Field's) give the businesses that remain potentially greater power to negotiate lower prices with Hanesbrands, thereby lowering revenue. With its high dependence of wholesaling, a small change in Hanesbrands’ business dealings with its large customers would greatly affect the company’s earnings.

Changes in Fashion Trends

Trends in the fashion world tend to change very quickly. Consumer tastes can vary widely from one season to the next, leading to large swings in a company's profits. On the whole, Hanesbrands is essentially immune from these fluctuations. Its basic undergarments are wardrobe staples and compete on the basis of price, not style. But in spite of this competitive advantage, Hanesbrands has been significantly exposed to changing fashion trends through its hosiery business. Today’s working women wears hosiery less then her mother did. The company’s own research shows that working-age women wear panty hose almost half as much as they did ten years ago. If this trend continues, the market for Hanes hosiery will continue to shrink, decreasing revenue.

Competition

Hanes' biggest competitors are two other underwear companies: Fruit of the Loom, which is owned by Berkshire Hathaway (BRK) and Jockey, which is still privately owned. Other competitors include the publicly traded Maidenform Brands and Warnaco Group.

References

  1. HBI 2009 10-K "Business" pg. 4
  2. HBI 2009 10-K "Our Brands" pg. 6-7
  3. HBI 2009 10-K "Customers" pg. 8-9
  4. 4.0 4.1 HBI 2009 10-K "Selected Financial Data" pg. 36
  5. HBI 2009 10-K "Our Segments" pg. 7-8
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