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Performance for all measures for the company in the third quarter were in line with company guidance, with net sales and EPS toward the higher end of guidance.
In the third quarter, the company also entered an agreement to add a distribution partner for Champion in South Korea. The company had previously announced the addition of a second distribution partner in China. Combined, the new distribution partners are expected to nearly double the number of Champion branded stores in China and Korea to more than 200 by the end of 2020.
Global consumer-directed sales, consisting of company-owned or brand retail stores and all online channel sales, increased 10 per cent on a reported basis in the third quarter, representing 23 per cent of total sales.
The International segment sales increased a stronger-than-expected 7 per cent as reported as sales for both activewear and innerwear increased. In addition to double-digit Champion activewear growth in Europe, Asia and Australia, the segment’s innerwear sales increased across multiple brands in Australia, Germany, UK, Mexico, and Canada, among others.
The US Innerwear segment net sales decreased 3.5 per cent in the third quarter. Segment sales of $578 million were modestly below company expectations, primarily as a result of a softer-than-expected back-to-school retail environment affecting Innerwear basics replenishment. Innerwear intimates sales were in line with company expectations.
Innovation continued to perform well in the segment. In basics, expansion of Comfort Flex Fit and X-Temp products continued. In intimates, shapewear sales increased for the fifth consecutive quarter, and new innovation introduced in bras, including EasyLight lightweight products, are succeeding as expected.
The US Activewear segment third-quarter net sales decreased 1 per cent. Outside the mass channel, Champion activewear sales increased 18 per cent. At mass, a slight increase in C9 by Champion sales was better than an expected decrease due to continued strong sell-through.
For the non-Champion portion of the segment, the company continued to focus on remixing to branded products to drive improving segment margins. The sales decline in this portion of the segment was a result of the previously disclosed exit of commodity programmes in the mass channel and softer industry demand trends across the printwear channel of trade.
“We are proud to have met or exceeded our financial guidance for each of the first three quarters of the year, and we have now raised the midpoint of 2019 guidance for net sales and EPS,” said Hanes chief executive officer Gerald W Evans Jr. “We have a strong diversified business model across geographies and product segments. Our International businesses are outperforming, global Champion growth continues, we are thriving in the consumer-direct channels, and we are charting a path back to growth for our US innerwear businesses through innovation and brand investment. We are driving significant operating cash flow growth, which was up approximately $100 million in the quarter, and we have reduced our net debt by nearly a half-billion dollars since a year ago at this time. Our long-term outlook is strong.”
Hanes has updated full-year financial guidance for 2019, including effectively raising the midpoint of the guidance ranges for net sales and EPS and tightening the high end of the range for operating profit.
The company expects 2019 net sales of $6.935 billion to $6.985 billion, GAAP operating profit of $900 million to $925 million, adjusted operating profit of $955 million to $980 million, GAAP EPS of $1.61 to $1.67, adjusted EPS of $1.74 to $1.80, and net cash from operations of $700 million to $800 million.
For the fourth quarter, net sales are expected to be in the range of $1.719 billion to $1.769 billion. GAAP operating profit is expected to be $248 million to $273 million, and adjusted operating profit is expected to be $259 million to $284 million. GAAP EPS is expected to be $0.46 to $0.52, and adjusted EPS is expected to be $0.48 to $0.54.
For the fourth quarter, International segment net sales on a reported basis are expected to increase approximately 4 per cent. US Innerwear net sales in fourth-quarter are expected to decline approximately 2 per cent, trending sequentially better than the third quarter.
For the fourth quarter, US Activewear sales are expected to decline approximately 7 per cent with high-teens growth for Champion outside of mass to be more than offset by declines in Champion at mass and the remainder of Activewear.
HanesBrands, based in Winston-Salem, NC, is a socially responsible leading marketer of everyday basic innerwear and activewear apparel in the Americas, Europe, Australia and Asia-Pacific. The company sells its products under some of the world’s strongest apparel brands, including Hanes, Champion, Bonds, Maidenform, DIM, Bali, Playtex, Bras N Things, Nur Die/Nur Der, Alternative, L’eggs, JMS/Just My Size, Lovable, Wonderbra, Berlei, and Gear for Sports. The company sells t-shirts, bras, panties, shapewear, underwear, socks, hosiery, and activewear produced in the company’s low-cost global supply chain.
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