Hanes reports sales boost in first quarter, launches Project Booster initiative
HanesBrands on Tuesday announced its first quarter 2017 results and the launch of Project Booster, a multiyear initiative to increase investment for growth, reduce costs, and drive cash flow.
The innerwear company in the first quarter began executing its Project Booster program, which will help the company accelerate global omnichannel and growth for Champion, invest in marketing and brand building, and drive annual cash from operations to over $1 billion.
“Our core Sell More, Spend Less, Generate Cash strategy is effective and creating value, but we feel we have the opportunity to energize these efforts to drive additional benefits, particularly by taking advantage of the strong global commercial and supply chain scale we have created through acquisitions,” said Hanes Chief Executive Officer Gerald W. Evans Jr. “Project Booster will unlock value beyond our ongoing growth efforts and the synergies we are reaping from acquisition integrations.”
Project Booster is expected to generate $300 million of incremental annual net cash from operations by 2020 for Hanes, as well as $100 million in annualized net cost savings after annualized growth reinvestment of $50 million.
To fund the growth initiative, reduce costs, and increase cash flow, Hanes expects to reduce its headcount, drive supply chain optimization and focus on inventory. Hanes offered corporate employees a voluntary separation program, and the company plans to make more headcount reductions in the second quarter. To date, 220 employees are being separated.
In addition to launching Project Booster, the North Carolina-based company posted a 13% increase in first quarter net sales to $1.38 billion, driven by acquisitions in 2016.
“We are off to the strong start of 2017 that we sought,” said Evans Jr. “We had one of our best first quarters for cash flow as we executed a disciplined working capital plan. Acquisitions, our Champion brand and online sales are contributing to growth as we weather expected challenges in the retail environment.
The acquisitions contributed $210 million in the quarter, which includes Champion that posted organic sales growth in the US, Asia, US men’s underwear and US online channel, and it helped the international segment increase by 71%.
Net cash from operations was $262 million compared to $285 million in the previous year, and operating profit on a GAAP basis for continuing operations decreased 1% to $121 million. When excluding pretax charges related to acquisition integrations, adjusted operating profit increased 9% to $160 million and adjusted EPS increased 12% to $0.29.
Hanes reaffirms its fiscal 2017 guidance and continues to expect net sales of $6.45 billion to $6.55 billion, adjusted operating profit of $935 million to $975 million, and adjusted EPS of $1.93 to $2.03.
In the second quarter, Hanes expects total net sales of $1.65 billion and adjusted EPS of $0.51 to $0.54. The company also expects to incur a Project Booster expense of $8 million in the second quarter.
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