Morningstar | Private label strategies evolving, but Hanesbrands' activewear/international progress overlooked.
We're confident in Hanesbrands' competitive positioning given advantages that are difficult for competitors to replicate: the firm's large owned and controlled supply chain, core product positioning in a space where brand is more important than price, and scale advantages through a growing portfolio of synergistic brands. We think the company is poised to post significant operating margin growth through recognition of synergies ($85 million in 2018 and 2019), $100 million in net cost savings from Project Booster, and $30 million-$40 million in manufacturing efficiencies.The company operates 50 manufacturing facilities, mostly in Asia, Central America, and the Caribbean Basin. In 2017, more than 70% of units sold were from own plants or those of dedicated contractors. When Hanes can internalize high-volume styles, we estimate that it saves as much as 15%-20%. Utilizing this manufacturing platform, Hanesbrands has been successful in making acquisitions to drive earnings growth. Hanesbrands' top line has come under pressure from secular trends to online sales (only 11% of revenue globally was online in 2017, and retailers were hit with bankruptcies and downsizing) and changes in retailer private label strategies (which likely explains Target's plan to exit the contract for the exclusive C9 by Champion line in 2020). However, Hanesbrands is distribution-channel-agnostic, and we think these trends affect only the near term and create an attractive entry point for investors. The transition to e-commerce is proceeding well, with the online revenue growth rate hitting 22% in the fourth quarter of 2017. As online sales increase as a mix of business (we model penetration reaching the midteens percentage of total sales in 2018), we think total company growth will rebound and see 1% organic revenue growth in 2018 (versus a slight decline in 2017) as well as contributions from acquisitions. We've also been impressed by the recent momentum for the Champion brand (growing at a healthy high-20s/low-30s clip the past four quarters on a constant currency basis) and international expansion efforts that haven't received the credit that we believe they deserve from the market.Hanesbrands is a marketer of basic innerwear and activewear apparel in the Americas, Europe, Australia and Asia/Pacific under some apparel brands, including Hanes, Champion, Bonds, DIM, Maidenform, Bali, Playtex, Lovable, Bras N Things, Nur Die/Nur Der, Alternative, L'eggs, JMS/Just My Size, Wonderbra, and Gear for Sports. The company's segments are: Innerwear, which includes apparel products, such as men's underwear, women's panties, children's underwear, socks and intimate apparel; Activewear, which includes T-shirts, fleece, performance apparel, sport shirts and thermals; and International, which includes innerwear, activewear, hosiery and home goods products, sold outside of the United States.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.