Not casting blame, but maybe the sharp decline in HanesBrands stock Friday should have been an omen that this wasn’t the Carolina Panthers’ year.
Hanes sells tons of briefs, hoodies and t-shirts, including a lot adorned with the Panthers’ logo. Sure, they sell a lot of Denver Broncos stuff too, but Hanes is — like the Panthers — an iconic North Carolina company. It’s just a bit older, having opened in 1901, and run for generations by a respected Winston-Salem family.
The company has been a huge investment success story, with its shares jumping from less than $6 in January 2012 to more than $34 last April — more than fivefold. The gains came as the company’s operating margins improved by more than five percentage points, aided by innovation in its apparel products and acquisitions that expanded the company’s market share in higher-priced categories.
But success always raises expectations and a small disappointment can create tough results. On Friday CEO Rich Noll said sales hadn’t met expectations in the fourth quarter, including activewear and what is delicately called “innerwear.” A key factor was that November and December were the third warmest since 1895, which slowed sales of cold-weather clothing.
During the quarter, sales dipped 7.4%, coming in $100 million less than expected, while earnings per share of 44 cents missed analysts’ estimates of 46 cents.
On the news, HanesBrands shares declined 15% to about $25, and now trade for about 25% less than in April.
Noll and HanesBrands’ executives said the poor quarter shouldn’t overshadow great opportunity. It projects earnings per share growth of 11% to 15% in 2016, even with sales growth expected to be 2% or less. Acquisitions of Maidenform, Knights Apparel and DBApparel are paying off, with more M&A activity on the horizon, Noll says.
HanesBrands also can bank on the fact that people keep buying basic apparel through thick or thin. During the recession years of 2007-09, sales of men’s underwear increased.
Like the Panthers, HanesBrands officials say, wait till next year.
