Hanesbrands Inc. (HBI) reported fourth quarter and fiscal 2010 results. The company reported earnings of 29 cents a share compared to a loss of $0.01 per share in the prior year quarter. However, earnings were below the Zacks Consensus Estimate of 31 cents. Profits were primarily impacted by debt-refinancing expenses, higher cotton costs and promotional expenses.

For fiscal 2010, the company reported earnings of $2.16 per share compared to 54 cents in fiscal 2009. However, earnings were well below the Zacks Consensus Estimate of $2.66.

For fiscal 2011, the company earnings are expected to be in the range of $2.60 to $2.80 per share. The Zacks Consensus Estimate for 2011 is $3.03 per share.

Revenues and Operating Profits

Total revenue for the quarter jumped 16.3% to $1,149 million from $988 million in the year-ago period, attributed to promotional initiatives, increase in shelf space, growth in retail sales and inventory restocking. Further, the company’s acquisition of Gear for Sports also contributed positively to the top line by 0.4%. Revenues were well ahead of the Zacks Consensus Estimate of $1,009 million.

Annual revenues grew 11.2% year-over year to $4.33 billion, which was below the Zacks Consensus estimate of $484 billion.

For fiscal 2011, the company expects continued double-digit growth in revenues in the range of $4.85 billion to $5.0 billion. Further, the company expects to implement price increases during 2011 primarily due to higher cotton costs. Price increases will vary from flat to low-single digits up to more than 30% for cotton-intensive categories. 

Hanesbrands delivered operating margin expansion of 70 basis points (bps) to 7.1% in the quarter and 230 bps expansion to 9.3% for the year.

Segment Details

Hanesbrands’ largest segments — Innerwear, Outerwear and International — represent 12%, 31% and 21%, respectively, of total revenue in the quarter. For fiscal 2010, revenues for the segments grew 10%, 20 and 16% respectively.

These three segments individually posted double-digit revenue growth in the quarter, partially offset by a decline in its Hosiery segment (4% of total revenue). However, the sales at Direct to Consumer segment, providing 9% of total revenue, moved up 5%.

In terms of segment operating profit, Innerwear posted a loss of 11%, while Outerwear plunged 0.7%. However, International segment had a 33.5% expansion, partially offset by a 20.3% decline at Hosiery. However, the operating profit at Direct to Consumer was down 8.7% for the quarter.

For the year 2010, operating profit in the Innerwear, Outerwear and International segments surged by 12%, 46% and 33% respectively. These were partially offset by a decline of 12.3% in the Hosiery segment and a decline of 30.4% in the Direct to Consumer segment.

Other Financial Updates

The company exited the year with cash and cash equivalents of $43.6 million and long-term debt of $1,990.7 million.

At the end of the year, Hanesbrands’ inventories increased 26% year over year to $1.3 billion.

 
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