Financial Roundup: Gildan Readies American Apparel Rollout, HanesBrands Aided by Acquisitions, Online Helps Delta Apparel

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Gildan gets set to start marketing American Apparel, HanesBrands is already benefiting from acquisitions and Delta Apparel is doing well with its e-commerce sales.

Gildan Activewear

In a Nutshell: Gildan said the second quarter was another period of earnings growth as it gets set to roll out American Apparel. Sales gains reflected the impact of contributions from acquisitions, with progress on integration activities on plan. Branded Apparel benefited from strong growth in men’s underwear and printwear benefited from continued momentum in fashion basics and international markets. Operating margins in the quarter increased by 200 basis points compared to the same quarter last year, driving adjusted earnings per share growth of about 20 percent in the quarter. Capital expenditures during the second quarter totaled $17.8 million primarily for investments in textile capacity, distribution and garment dyeing expansion.

Sales: Consolidated net sales rose 3.8% in the second quarter ended July 2 to $715.4 million, compared to sales of $688.9 million in the second quarter in 2016, reflecting increases of 1.9% in the printwear segment and 8.1% in branded apparel. The sales increase was driven by acquisitions and higher net selling prices, notably a $17 million sales contribution from the Peds acquisition and strong growth in men’s underwear, partly offset by lower global lifestyle and Gold Toe sock sales reflecting weakness in department stores and national chains.

Earnings: Net earnings for the three months increased 13.7% to $107.7 million compared with net earnings of $94.7 million for the same period last year. Branded Apparel operating income increased 52 percent to $26 million from $17.1 million in the year-ago quarter.

CEO’s Take: Glenn J. Chamandy, president and chief executive officer, said, “We continue to look for acquisitions, but right now we’re focused on integrating American Apparel. At the same time, with all the instability in the market, hopefully it creates an opportunity and we can continue to acquire companies that add value.”

Chamandy said the first focus with American Apparel was to get back into an inventory position for wholesale distribution channels, which is happening now, and then to launch direct-to-consumer through e-commerce, which will bow in the next couple of weeks. He said this will feature a wider range of styles than just printed T-shirts, such as jeans.

“The next step is to evaluate the retail opportunity,” Chamandy added. “We’re going to  re-energize the brand on the advertising and marketing side…with the intention to expand internationally in 2018. We think it’s going to be quite big going forward. We’ve invested $215 million in yarn spinning to support the segment and the brand. At the end of the day we will do very well with this brand and it could wind up being the best acquisition Gildan has ever made.”

[Read more about American Apparel: Gildan to Let American Apparel Consumers Choose US or Foreign-Made Tees]

HanesBrands

In a Nutshell: Hanesbrands continued to execute its multiyear Project Booster program to generate investment for sales growth, reduce costs and increase cash flow. As expected, the Winston-Salem, North Carolina-based company incurred Project Booster-related expense in the second quarter of about $8 million, including funding an employee separation program. For the full year, Project Booster is expected to be cost-neutral with cost savings realized in the second half. By the end of 2019, Project Booster is expected to generate approximately $150 million in annualized cost savings, with annualized reinvestment of approximately $50 million of the savings for targeted growth opportunities.

Sales: For the second quarter ended July 1, net sales increased 12 percent to $1.65 billion from $1.47 billion a year earlier, mostly from acquisition contributions completed in 2016, primarily Champion Europe and Hanes Australasia, which contributed about $220 million in net sales in the period. Second quarter sales in the online channel globally increased 25 percent, while Global Champion sales increased 7 percent in the quarter. The Innerwear segment saw sales decline 2.5% to $719 million.

Earnings: Second-quarter net income increased 34.6% to $172.53 million compared to $128.14 million in the year-ago period. Operating profit rose 3.4% to $228.68 million from $221.21 in the same period a year earlier. For 2017, the company expects an operating profit of $845 million to $895 million.

CEO’s Take: CEO Gerald W. Evans Jr., said: “We continued our strong start to 2017 in the second quarter, consistent with our guidance. Organic sales trends continued to improve sequentially, acquisitions are contributing value as expected and our cash-flow efforts, including disciplined inventory management, are generating strong results. Our team is doing a great job executing our Sell More, Spend Less, Generate Cash strategies and laying the foundation for taking our performance to the next level in the years to come through our Project Booster initiative.”

Delta Apparel

In a Nutshell: Delta Apparel said while many retail channels remain challenging, the Greensville, South Carolina-based manufacturer and brand marketer continues to improve its market position. The company said its omnichannel marketing strategy combined with its strong Made in America manufacturing base is driving growth in its basics and branded segments.

Sales: Sales in the quarter increased 4 percent to $104.3 million year-over-year, after excluding sales in the recently divested Junkfood Clothing Company business during the prior year quarter. Basics segment net sales in the period grew 9.6% to $79 million from $72.1 million in the prior-year quarter. Delta Catalog sales benefited from improving conditions in the retail licensing channel coupled with continued growth in the ad-specialty and regional screen print markets. A double-digit growth trend continued in Delta Catalog’s fashion basics, with sales up 60 percent from the prior year third quarter. Branded segment net sales for the quarter were $25.3 million, compared with $39.5 million in the prior year period, which included $11.3 million of sales in the since-divested Junkfood business. The decline was due primarily to the impact of retail bankruptcies.

Earnings: Operating income in the quarter rose 38.3% to $5.85 million a year earlier, as net income gained 75.7% to $4.47 million compared to $2.54 million. Profit in the basics segment increased to $7.5 million, a 44.2% hike from $5.2 million in the prior year period. Operating profit for the branded segment was $2.1 million compared to $2.7 million in the prior year quarter.

CEO’s Take: Robert W. Humphreys, chairman and CEO, said, “We continue to be pleased with our e-commerce business, which achieved year-over-year sales growth of 41 percent on our consumer sites during the quarter…and 15 percent on our business-to-business sites during the quarter. Activewear performed well, with strong organic growth. We are realizing the incremental benefits of its manufacturing realignment and the manufacturing efficiencies have exceeded our expectations. We just launched a newly redesigned business-to-business web site that we believe will greatly enhance the on-line experience for activewear customers.”


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