The 2013 acquisition of Maidenform and 2014 purchase of DBApparel helped Hanesbrands Inc. exceed earnings estimates in the fourth quarter.
The purchases also allowed the Winston-Salem, N.C.-based knitwear giant to report hefty double-digit sales increases for both the quarter and full year, as opposed to a single-digit increase in the three months and a similarly sized decline for the year with its newest assets.
In the three months ended Jan. 3, net income reached $89.4 million, or 88 cents a diluted share, versus $32.3 million, or 32 cents, in the 2013 quarter. On an adjusted basis, eliminating effects from acquisitions and other actions, EPS was $1.46, 3 cents better than analysts, on average, expected.
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Sales for the quarter were $1.52 billion, 18.4 percent above the $1.29 billion registered in the 2013 period but below the $1.56 billion expectations of analysts. At constant currency, sales were up 19 percent.
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Excluding the $210 million contribution of DBApparel in the quarter, sales were $1.31 billion, 2.1 percent above the 2013 mark.
Gross margin improved to 35.8 percent of sales from 33.2 percent a year ago while operating margin reached 8.6 percent versus 5.6 percent.
Hanesbrands on Wednesday increased its quarterly dividend by one-third to 40 cents a share and said it would execute a 4-for-1 stock split on March 4.
“We are in the midst of a multiyear period of strong growth supported by our powerful company-owned global supply chain, Innovate-to-Elevate product platforms and acquisitions,” said Richard Noll, chairman and chief executive officer, on a late afternoon conference call.
By segment, innerwear sales dipped 0.1 percent in the quarter to $699.7 million while the unit’s operating profit expanded 17.3 percent to $146.7 million. Activewear enjoyed a 9.6 percent sales increase, to $373 million, while its operating profits grew just slightly faster, rising 9.8 percent to $48 million. Within activewear, sales of the Champion brand, excluding those in the mass channel, were up more than 20 percent.
Hanesbrands’ 2015 earnings guidance for adjusted EPS of between $6.30 and $6.50, on a pre-split basis, bracketed the Wall Street estimate of $6.42, but its expectations for sales of $5.78 billion to $5.83 billion fell beneath the $6.04 billion previously anticipated by analysts.
“Our 2015 growth rates would have been even greater had they not been dampened $230 million in sales, $44 million in operating profit and 37 cents in EPS by two events outside our control — the rapid strengthening of the dollar and the unexpected bankruptcy of Target Canada,” Noll said. “Our guidance assumes 90 percent of the Target Canada business is unrecoverable in 2015 and the euro is at $1.10.”
The euro traded at $1.13 against the dollar on Thursday.
For the full year, net income was up 22.4 percent to $404.5 million, or $3.97 a diluted share, from $330.5 million, or $3.25, in 2013. Sales rose 15.1 percent to $5.32 billion from $4.63 billion. Subtracting the contributions of Maidenform and DBApparel, sales would have declined 1.8 percent to $4.54 billion.