• Across-the-board growth in the Outerwear segment, led by the Just My Size, Champion and Hanes brands, resulted in a 16 percent sales increase for the quarter and a doubling of operating profit over weak levels last year. Retail casualwear sales more than doubled, fueled by growth of the company's Just My Size brand of plus-size apparel, while retail activewear and wholesale casualwear had mid-single-digit sales gains. • International segment sales increased by 14 percent, with double-digit gains in all countries, except low single-digit growth in Mexico and a decline in Japan. Segment operating profit increased by nearly 50 percent.
Guidance Hanesbrands has raised its 2010 net sales guidance to 8 percent to 10 percent growth, up from 6 percent to 8 percent. The company raised guidance as a result of additional new sales programs for the second half of the year, higher than expected productivity of new programs from previously announced shelf-space gains, and expectations of a continued overall increase in consumer spending and retailer inventory restocking.
Based on expected sales growth and operating margin expansion, Hanesbrands has raised its 2010 EPS guidance to $2.25 to $2.35, up from the previous guidance of $2.15 to $2.27.
Operating margin improvement for the year is expected to be at the high end of the company's previously stated goal of 50 to 100 basis points. This improvement includes the negative impact of an approximate $25 million to $30 million in expected incremental short-term costs to secure product, service customers and maximize potential sales growth in 2010.
Interest expense for the year is expected to be approximately $150 million to $153 million, and the full-year tax rate, including the second-quarter adjustment, is expected to be approximately 14 percent to 15 percent, up from the 2009 rate of 12 percent.
Inventories at the end of the quarter were $1.3 billion, up $61 million, or 5 percent, from the end of last year's second quarter. Year-end inventories are expected to increase by up to $100 million over last year, an increase of approximately 9 to 10 percent, which is in line with expected 2010 sales growth. Strong profit growth partially offset by working capital investment is expected to yield free cash flow of $200 million to $250 million in 2010.
Based on the 2010 performance guidance, the company's debt to EBITDA leverage ratio could fall to less than 3.5 times assuming free cash flow were used entirely to pay down debt to the $1.65 billion to $1.7 billion level. Hanesbrands' EBITDA leverage ratio was 4.6 times at the end of 2009.
Because of systemic cost inflation, particularly for cotton, energy and labor, Hanesbrands is working with its customers to offset 2011 cost increases through joint efficiency initiatives as well as price increases. The timing and size of price increases will vary by product category. While some price increases will take effect in the third and fourth quarters of 2010, the majority of the pricing impact will begin in 2011.
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Telangana State Industrial Infrastructure Corporation Limited (TSllC Ltd)")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Taiwan Textile Federation (TTF)")
