HanesBrands (NYSE: HBI) reported Q1 EPS of $0.29, $0.01 better than the analyst estimate of $0.28. Revenue for the quarter came in at $1.38 billion versus the consensus estimate of $1.38 billion.

GUIDANCE:

HanesBrands sees FY2017 EPS of $1.93-$2.03, versus the consensus of $1.97. HanesBrands sees FY2017 revenue of $6.45-6.55 billion, versus the consensus of $6.46 billion.

2017 Financial Guidance

Hanes issued initial full-year guidance for 2017 in February and reaffirmed guidance in April. The company has issued second-quarter guidance for select performance measures.

For 2017, the company continues to expect net sales of $6.45 billion to $6.55 billion, GAAP operating profit of $845 million to $895 million, adjusted operating profit excluding actions of $935 million to $975 million, GAAP EPS for continuing operations of $1.70 to $1.82, adjusted EPS excluding actions for continuing operations of $1.93 to $2.03, and record net cash from operations of $625 million to $725 million.

Compared with 2016 results, the midpoint of 2017 guidance represents net sales growth of 8 percent, GAAP operating profit growth of 12 percent, adjusted operating profit growth of 5 percent, GAAP EPS growth from continuing operations of 26 percent, adjusted EPS growth from continuing operations of 7 percent, and operating cash flow growth of 11 percent.

Factors Affecting Cadence of Guidance. Full-year net sales guidance includes expected incremental sales from acquisitions of approximately $420 million to $430 million, primarily in the first half. Organic sales growth is expected to range from flat to up 2 percent, with Innerwear sales trends expected to normalize in the third quarter and full-year segment sales comparable to 2016.

Second-Quarter Guidance. The company expects total net sales of approximately $1.65 billion in the second quarter. Acquisitions are expected to contribute approximately $200 million in net sales, while organic sales are expected to decline as a result of the retail sales environment and a timing shift of back-to-school shipments. More back-to-school shipments are expected to fall in the third quarter than a year ago as retailers time orders closer to sales events.

Second-quarter GAAP EPS for continuing operations is expected to be $0.45 to $0.49, and adjusted EPS is expected to be $0.51 to $0.54. The company expects approximately 370 million weighted average diluted shares outstanding.

As part of Project Booster, the company expects to incur Project Booster expense of approximately $8 million in the second quarter. In total, with savings being realized by the end of the year, the Project Booster efforts are expected to be cost neutral for 2017.

Additional Full-Year Guidance. The company expects approximately $15 million in synergy cost benefits in 2017, primarily from the acquisitions of Hanes Europe Innerwear and Knights Apparel. The company realized approximately $5 million of synergies in the first quarter. Synergies from the Hanes Australasia (Pacific Brands) and Champion Europe acquisitions are expected to substantially begin in 2018.

In conjunction with acquisition integration in 2017, the company continues to expect to incur an estimated $80 million to $90 million of pretax charges for actions related primarily to Hanes Europe Innerwear, Knights Apparel, Hanes Australasia, Champion Europe, and supply chain rebalancing as a result of the acquisition integrations.

Guidance for operating cash flow growth in 2017 includes the expected benefits from net income growth and lower pretax cash charges related to acquisitions.

The company continues to expect capital expenditures of approximately $90 million to $100 million in 2017. The company is not required to make a pension contribution in 2017 and does not anticipate making a voluntary contribution, compared with a $40 million voluntary contribution in 2016.

Hanes continues to expect interest expense and other expenses to be approximately $175 million combined, an increase of $18 million as a result of acquisition-related borrowing in 2016. The 2017 full-year tax rate is expected to be comparable to 2016, assuming no changes to U.S. tax law and policy. The company made share repurchases of approximately $300 million in the first quarter and expects approximately 370 million weighted average diluted shares outstanding for the full year and second, third and fourth quarters.

Highlights

• 1Q 2017 Net Sales of $1.38 Billion Increased 13%; GAAP EPS of $0.19 and Adjusted EPS of $0.29
• Strong Cash Flow Benefited from Working Capital Discipline
• Company Announces “Project Booster” Multiyear Initiative to Invest for Consistent Organic Sales Growth and Drive Annual Cash from Operations to more than $1 Billion

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