Tags: Hanesbrands | stock | performance | HBI

Hanesbrands Stock Run Unlikely to Continue

By    |   Monday, 05 March 2012 08:22 AM

Hanesbrands (HBI), the country’s largest underwear seller in many categories, has enjoyed a spectacular stock performance over the past few years, but that’s unlikely to continue.

It’s not that the company, which also sells outerwear, is struggling. It’s just that Hanesbrands expects its financial performance to slip a bit and the stock has risen recently at a stunning rate.

The company spun off from Sara Lee in 2006, and its brands include Hanes, Champion, Playtex, L’eggs and Wonderbra.

Hanesbrands shares have produced an annualized total return of 54 percent over the past three years and already have jumped 23.4 percent so far this year. That’s a difficult pace to keep up.

The company recently reported 2011 earnings that failed to reach its forecast thanks to retailers shrinking their inventories in December. Hanesbrands now forecasts that sales growth and profit will decline this year.

Earnings drop

Management sees earnings per share falling between 3 percent and 7 percent from 2011 and sales growth slowing to between 2 percent and 4 percent after registering 7 percent growth last year.

Hanesbrands is concerned about inflation and intense competition in outerwear but believes their impact will wane in the second half of the year.

On the plus side, the company expects to generate record free cash flow this year. It also should continue to save money from its decision to shift most of its factories to Central America and Asia from North America. The move consolidates 131 plants to 54 locations.

Of 11 analysts tracked by Thomson Reuters, six rate Hanesbrands a strong buy, two rate it a buy, and one a hold.

The company’s profit soared 46 percent to $41 million in the fourth quarter from a year earlier. Revenue was little changed at $1.1 billion.

Hanesbrands next reports earnings April 19.

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