Hanesbrands adjusted 3Q profit beats expectations

Apparel maker Hanesbrands Inc. says restructuring charges and Mervyns' unexpected liquidation of its stores helped drive its third-quarter profit down 59 percent, but adjusted earnings beat Wall Street expectations.

The Winston-Salem, N.C.-based apparel maker's profit for the three months ended Sept. 27 fell to $15.9 million, or 17 cents per share, from $38.9 million, or 40 cents a share, last year. Excluding restructuring charges and a bad-debt write-down related to department store Mervyns' decision to liquidate its stores, profit totaled 56 cents per share.

Revenue was flat at $1.15 billion.

Analysts polled by Thomson Reuters, on average, expected profit of 54 cents a share on revenue of $1.12 billion.

The company says sales of Hanes male underwear, Playtex and Champion activewear — along with Bali and the sock business — were strong, but sheer hosiery sales declined.

Hanesbrands plans to raise domestic prices in the 2009 first quarter by about 4 percent to give it "flexibility" amid a weak environment, and help offset higher cotton and other costs such as rising global wages.

However, the company said retailers themselves set prices so it is unclear how much consumers will feel the effect of an increase in wholesale prices.

Apparel in general has been a hard-hit category as consumers cut back amid a deteriorating economic environment. But Hanesbrands said its market share in men's underwear and men's and women's socks has risen over the past 12 months.

"Overall, our share gains are coming at the expense of other national brands and private-label," Chief Executive Richard Noll said in a conference call with investors.

While the company does not offer specific quarterly guidance, Noll said sales are likely to decline but he "remains optimistic" about earnings, as cost savings will offset higher commodity costs.

"Exceeding 25 percent earnings per share growth for the total year still remains a viable goal," Noll said.

Hanesbrands Inc., since being spun off from food maker Sara Lee Corp. in 2006, has focused on restructuring its business, cutting jobs, closing plants and distribution centers and moving production to sites in Asia and Central America. In September, Hanesbrands said it will close nine plants across five countries and cut about 12 percent of its work force as it restructures its operations.

During the conference call Hanesbrands said it has taken about $206 million of the $250 million in charges it expects to incur in the three years following its spinoff.

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