Apparel company Hanesbrands Inc. (HBI) had a bumpy ride in the fourth quarter of 2023, falling short of expectations in both earnings and net sales. This was exacerbated by a year-over-year decrease in both metrics, compounded by unexpected difficulties in the sales environment, culminating in a decline across all segments within the quarter.

Q4 in Detailed Numbers

The company recorded an adjusted earnings from continuing operations of 3 cents per share, missing the Zacks Consensus Estimate of 9 cents. This marked a decrease from 7 cents per share reported in the year-ago quarter. Net sales from continuing operations declined by 12% to $1,296.8 million, falling short of the Zacks Consensus Estimate of $1,361.7 million. These numbers include nearly 130 basis points from the U.S. Hosiery divestiture and almost 40 basis points from unfavorable currency rates. Organic net sales also fell by nearly 10% due to unforeseen global consumer environment challenges, particularly in the U.S. activewear market and in Australia.

Global Champion brand sales took a major hit, nosediving by 23%, with a significant 30% decline in the United States and a 14% decline internationally. International brand sales also took a 15% hit on a constant-currency basis compared to the prior-year quarter.

Hanesbrands Inc. Price, Consensus and EPS Surprise

Hanesbrands Inc. price-consensus-eps-surprise-chart | Hanesbrands Inc. Quote

Adjusted gross profit came in at $495.4 million, down from $504.9 million reported in the year-ago quarter. The adjusted gross margin was 38.2%, exceeding expectations due to benefits from inventory actions, cost-saving initiatives, and reduced input costs. However, it was not without challenges, as increased wage inflation continued to be a stumbling block. Adjusted SG&A expenses declined by 9% to $385 million, but the metric, as a percentage of net sales, increased by 100 basis points due to reduced sales and increased brand marketing investments.

Segmental Performance

Innerwear: Despite a 5% drop in the market, the segment gained market share in the Men and Women category. The segmental operating margin stood at 21.1%, marking a significant increase of almost 1,280 basis points.

Activewear: Sales for this segment plunged by 24.1%, influenced by challenging activewear apparel market dynamics and the company’s strategic brand-related actions.

International: Revenues in the International business dropped by 8.6%, including nearly $6 million of unfavorable currency headwinds. Notably, growth in Innerwear across the Americas and Champion in China was offset by softness in Australia and Champion decreases in Europe, Japan, and Canada. The segmental operating margin stood at 16.2%, up nearly 200 basis points.

Financial Snapshot and Guidance

The company ended the quarter with $205.5 million in cash and cash equivalents, long-term debt of $3,235.6 million, and total stockholders’ equity of $419.4 million. It had around $1.1 billion of available capacity under its credit facility at the end of the quarter. For 2024, net sales from continuing operations are anticipated to range from $5.35-$5.47 billion, with adjusted operating profit from continuing operations expected to be $500-$520 million. Adjusted earnings per share from continuing operations are envisioned to be 42-48 cents.

The company provided $274 million in net cash from operating activities, with free cash flow at $266 million in the fourth quarter of 2023. For first-quarter 2024, net sales from continuing operations are expected to be $1.13-$1.19 billion, including a projected headwind of nearly $13 million from currency rates. Adjusted operating profit from continuing operations is expected to be $60-$80 million, with adjusted loss from continuing operations envisioned to be 4-10 cents per share.

HBI’s shares have notably increased 13.2% in the past three months, distinguishing itself from the broader industry’s 13.5% decline.

Final Thoughts

In light of Hanesbrands Inc.’s Q4 performance, the road ahead seems challenging but not insurmountable. It is crucial for investors and stakeholders to be cautious yet optimistic, keeping a keen eye on the company’s strategies to navigate through the tough market conditions. As Hanesbrands Inc. adjusts its sails in response to the shifting winds of the consumer environment, its ability to strike the right balance between cost-saving initiatives and brand marketing investments will be pivotal in steering the ship toward calmer waters.

Reconsider Your Portfolio

Considering the turbulence in the apparel market, it would be prudent to consider diverse investment options. GIII Apparel Group, Urban Outfitters, Inc., and PVH Corporation have emerged as better-ranked stocks. GIII Apparel, in particular, with its Zacks Rank #1 (Strong Buy), presents itself as a promising contender, demonstrating an EPS surprise of 33.7% in the third quarter.

Urban Outfitters (URBN), Hanesbrands (HBI), PVH Corp (PVH), and G-III Apparel Group (GIII) are poised to take the stage as the retail industry gears up for an eventful fiscal year of 2022.

Financial Standing of Urban Outfitters

Urban Outfitters, with a Zacks Rank #2 (Buy), stands tall as a beacon of growth potential. The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year sales and earnings spells a promising 7.5% and 85.7% growth, respectively, from the fiscal 2022 reported figure. This marks a substantial upward trajectory from the previous fiscal year, signaling significant promise for investors. URBN boasts a trailing four-quarter earnings surprise of 22%, demonstrating a consistent track record of outperforming expectations.

Riding the Wave of Success

With a trailing four-quarter earnings surprise of 541.8%, G-III Apparel Group (GIII) is set to amplified soundscapes of success in the retail sector. As the fiscal year unfolds, GIII continues to make a formidable impression, with a growth trajectory that showcases the potential to soar to new heights. The exciting amalgamation of creativity and business acumen sets G-III Apparel Group apart as a powerhouse in the retail industry.

Lifestyle Retail Marvel: PVH Corp

PVH Corp, a leading player in the lifestyle retail arena, currently holds a Zacks Rank #2 with a trailing four-quarter earnings surprise of 18.9%, reflecting its robust financial performance and market standing. The company’s poised position signals resilience and innovation, rounding up an ensemble of significant contenders set to redefine the retail landscape.

Investment Potential

The retail sector is abuzz with potential as the current fiscal year sets the stage for substantial growth and innovation. With the retail brands poised to take center stage, a timely investment in these forward-looking companies presents an opportunity that investors can seize as they emerge from bear market lows.

As the fiscal year progresses, these industry players, such as Urban Outfitters and others, herald a trend of substantial growth and innovation, akin to the explosive surge witnessed with previous stock standouts like the Boston Beer Company and NVIDIA. The stage is set for these retail brands to captivate the market with their exceptional performance, setting new benchmarks and redefining expectations.

For investors seeking the latest recommendations and insights from Zacks Investment Research, valuable reports are available to guide informed decisions and strategic moves.

To gain comprehensive insights and analysis of the performance of Urban Outfitters, Hanesbrands, PVH Corp, and G-III Apparel Group, free stock analysis reports are available to support informed decisions.

Investors can also access additional resources on Zacks Investment Research to capitalize on market insights and make well-informed decisions as the fiscal year unfolds. The retail industry represents an exhilarating arena rife with opportunities for the discerning investor.

For more insights, readers can refer to the original article on Zacks.com. Exciting developments await, and the journey promises to be as thrilling as it is rewarding for investors who are ready to take the plunge into the world of retail stocks.

Embrace the extraordinary potential of these retail giants as they navigate the dynamic landscape of 2022, poised to carve a trail of unparalleled success.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.