Hanesbrands’ Sales Slip, Profits Dive

Winston Salem, NC-based Hanesbrands, which began operating as a publicly traded company on Sept. 5, 2006, reported financial results for its first quarter and six-month transition period ended Dec. 30, 2006. A spin-off of Chicago-based food and consumer goods manufacturer/marketer Sara Lee Corp., Hanesbrands posted first-quarter sales of $1.13 billion, reflecting a 4.3% decrease from the $1.18 billion in the same quarter a year ago. Total sales for the six-month transition period fell 3%, to $2.25 billion.

Hanesbrands, which generated $4.7 billion in net sales for fiscal 2005, includes the Hanes, Champion, and Playtex underwear and casual apparel lines, as well as the One Hanes Place and Just My Size catalogs and Websites. Company officials attributed the first-quarter sales dip to a weakness in the innerwear segment, and the intentional discontinuance of low-margin product lines in the outerwear segment.

“We have successfully completed our first full quarter as an independent company, and we are looking forward to putting the transition period behind us,” Hanesbrands CEO Richard A. Noll said in a statement. “Regarding performance in the transition period, sales began to soften in the December quarter, but the company’s operating profit margin in the six-month period excluding restructuring and special items was on track. Our ability to generate strong cash flow from operations and balance sheet improvements enabled us to pay down long-term debt by more than $106 million and make a voluntary $48 million contribution to reduce our underfunded liability for qualified pension plans.”

Net income for the six-month period plummeted nearly 61%, to $74.1 million compared to $188.6 million the previous year. The decrease in net income, company officials said, was due to increased interest expense, reduced operating profit, and a higher income tax rate.

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