Operating profit in the quarter ended Sept. 28, 2013, increased 13 percent to $177 million and diluted earnings per share increased 11 percent to $1.23, up from $1.11 a year ago
The company delivered strong profitability despite general retail weakness in the back-to-school selling period. Net sales in the quarter decreased 2 percent to $1.2 billion, although on a constant currency basis net sales declined less than 1 percent.
The company’s Innovate-to-Elevate strategy, which combines brand power, supply chain savings and product innovation, helped drive both core-product and new-product success, resulting in share gains in the quarter. Gross margin expanded to 35.2 percent, up 240 basis points compared with last year’s quarter, and operating margin improved to 14.8 percent, a 200-basis-point expansion even with the company increasing its media investment by $8 million in the quarter. All three components of the Innovate-to-Elevate strategy combined to drive the majority of the operating margin improvement.
Hanes has increased its full-year 2013 guidance for the second consecutive quarter, with the entire new EPS range above the high end of the previous range. The company’s new full-year guidance anticipates net sales of slightly more than $4.6 billion; adjusted operating profit of $580 million to $590 million; adjusted EPS of $3.75 to $3.85; and free cash flow of $475 million to $525 million. The guidance includes performance expectations for Maidenform Brands, which was acquired Oct. 7, 2013, but adjusted operating profit and earnings expectations exclude one-time acquisition-related expenses.
The company is also raising its 2014 adjusted EPS target range to $4.25 to $4.50 excluding actions, up from the low $4 range provided on its second-quarter earnings call.
“We had a great quarter with record earnings and strong margins,” Hanes Chairman and Chief Executive Officer Richard A. Noll said. “Our brands are gaining share, our supply chain is generating savings, and our product innovations are creating value. Given our strong earnings momentum, we are raising our earnings guidance for both 2013 and 2014 despite a soft retail environment.”
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