These days, basics matter. And, no surprise, companies with footholds in no-nonsense niches are faring well. HanesBrands (HBI), which makes t-shirts, underwear and socks, is one of those lucky few.
HanesBrands was spun off from Sara Lee in 2005. Its cachet is from well-known brands, such as Hanes underwear, Wonderbra, and Playtex. These basics are sold at big retailers such as Wal-Mart (WMT), Target (TGT), and Costco (COST). Late last year, HanesBrands added more punch to its bottom line when it bought Gear for Sports, which sells licensed logo apparel in college bookstores.
The upshot is that HanesBrands is churning along. Second quarter sales for the Winston-Salem, N.C. company rose 14 percent to $1.23 billion versus a year ago. So far, there has been six consecutive quarters of accelerating sales growth, noted HanesBrands CEO Richard Noll. International sales, especially in China and Asia, were strong, along with outerwear goods. Earnings were nearly flat, at 1.6 percent.
Yet cotton costs are soaring. HanesBrands products such as T-shirts are slated to be 30 percent more costly this year, denting share growth and disappointing some analysts. The apparel maker expects cotton prices to spike higher until 2013.
Lots of analysts like HanesBrands. Of the 10 analysts followed by Thomson/First Call, seven have strong buy recommendations and three have holds. Sterne Agee analysts agree. They have a buy rating on HanesBrands, citing its valuable pricing power. The company reports next in mid-October.
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