Champion Drives Parent Company Net Cash Flow To More Than Double.

In August 1st, the Champion brand's parent company, the American underwear and sportswear manufacturer HanesBrands announced the key financial data in the second quarter of fiscal year 2019, and the Champion brand's global sales grew by over 50% (excluding the traditional US mass market channel), achieving eight consecutive quarters of two digit strong growth. Group net sales, operating profit and diluted earnings per share performed strongly, reaching the upper limit of the expected performance interval. At the same time, the company hopes that the fiscal year will reach the expected intermediate value.

As of the second quarter of June 29th, the key financial data for HanesBrands are as follows:

Net sales increased by 3% to $1 billion 760 million, up 5% over the same period of exchange, achieving eighth consecutive quarters of organic growth.

According to GAAP (generally accepted accounting principles), operating profit increased by 6% to US $234 million over the same period, and adjusted operating profit increased by 1% to US $247 million over the same period last year.

According to GAAP, diluted earnings per share increased by 8% to $0.42 / share, adjusted earnings per share were unchanged from last year, to $0.45 per share.

According to GAAP, net profit increased 9.5% to $154 million compared to the same period last year.

Sales in the underwear department were expected to exceed 10%, while sales in the international market increased by 4%, higher than expected.

Global direct sales, including direct sales and all channels' online sales, grew by 8% over the same period last year, contributing 23% of sales to the group.

2019 in the first half of fiscal year, HanesBrands group's net sales increased 5.1% to 3 billion 350 million US dollars compared with the same period last year, and net profit increased 6.1% to 233 million US dollars compared with the same period last year.

HanesBrands's chief executive, Gerald W. Evans Jr, said: "our successful growth strategy has driven strong growth in the second quarter and half year, including Champion brand growth, effective product innovation, international growth and sustained direct sales growth. The results of the second quarter and the first half of the fiscal year, coupled with our plans for the second half of the year, gave us confidence to achieve or even exceed the previous year's expectations. Champion's orders are still strong. We have also planned new product innovations, and the prospects for the international market are still positive and operating margins are also growing. The group is steadily reaching the target of cash flow and debt leverage. "

In the second quarter, Champion grew in the markets of North America, Europe, Asia and Australia. The retail business of Chinese market is constantly adding brand stores. HanesBrands also added a retail partner to accelerate the expansion of stores and online sales in 2020.

HanesBrands said it has prepared underwear projects for brand planning of Hanes, Maidenform, Bali, DIM and Bonds, and will launch new products including bra, cooling body, pressure socks, second generation X-Temp cooling fabrics and so on.

Champion is bringing its latest graphic ornament technology and its traditional brand of knitted fabric into innovative products such as sports bra. Hanes, Alternative, Champion, Bonds and DIM brands are making underwear or sportswear products using recycled spinning, plastic, organic cotton or cellulosic fabrics.

In the second quarter, HanesBrands net cash flow more than doubled, and debt leverage fell. Net cash flow in the quarter was $137 million, and net liabilities decreased to 3.9 times from 3.9 times the profit before interest tax depreciation and amortization (EBITDA) in the same period last year. It is hoped that net liabilities will be 2.9 times the adjusted EBITDA by the end of the year.

By Sector:

Underwear: net sales fell 2% year-on-year, operating profit fell 6%

Sportswear: net sales increased by 10% over the same period last year, operating profit increased by nearly 20% compared with the same period last year, and the operating profit margin increased by 120 basis points to 15.3%.

Champion sales exceeded expectations, mainly driven by sales growth of existing counters, expansion of wholesale channels, direct sales growth, product supply improvement, and growth of market segments.

Champion's sales in the traditional mass market channel business in the United States, "C9 by Champion", grew by 8% year-on-year.

Sales outside the Champion declined, mainly due to the group's withdrawal from commodity centered businesses, focusing on improving profitability.

International Business: net sales increased by 4% over the same period last year, increasing by 10% over the same period. Operating profit increased by 6% compared to the same period last year, and increased by 12% over the same period. Operating margins increased by 20 basis points to 14.3%; underwear and sportswear products grew rapidly in the global market. From the regional market perspective, Europe and Asia grew by two digits, while Australia grew at a high single digit rate.

The third quarter of fiscal year 2019 is expected to:

Net sales amounted to 1 billion 840 million ~18.75 billion dollars.

According to GAAP, the operating profit is 264 million ~2.74 billion, and the adjusted operating profit is 276 million ~2.86 billion US dollars.

According to GAAP, earnings per share were 0.49~0.52 dollars, adjusted earnings per share 0.52~0.55 dollars.

HanesBrands 2019 annual forecast for fiscal year:

Net sales amounted to 6 billion 885 million ~69.85 billion dollars.

According to GAAP, the operating profit is 900 million ~9.3 billion, and the adjusted operating profit is 955 million ~9.85 billion dollars.

According to GAAP, earnings per share were 1.59~1.67 dollars, adjusted earnings per share 1.72~1.8 dollars.

Author: Jiang Jingjin