Bloomberg News

Hanesbrands Profit Drops on Costs for Plant Closings (Update4)

February 01, 2007

Hanesbrands Inc. (HBI:US), the clothing maker spun off from Sara Lee Corp. in September, said fourth-quarter profit fell because of costs to cut jobs and close plants.

Net income for the three months ended Dec. 30 declined 78 percent to $23.8 million, or 25 cents a share, from $106 million, or $1.10, a year earlier, Winston-Salem, North Carolina-based Hanesbrands said today in a release. Sales fell 4.3 percent to $1.13 billion.

Chief Executive Officer Richard Noll has shifted production to lower cost factories, shutting four plants and cutting 2,700 jobs to reduce expenses as the company restructures after the spinoff. Sales of bras and men's underwear slowed in the quarter as retailers focused on consumer electronics during the holiday season, Noll said today during a conference call.

``The apparel sector's fight for the consumer wallet isn't only against electronics, it's with vacations, health prices, ballet lessons for their daughter and on and on,'' Emanuel Weintraub, a management consultant with Emanuel Weintraub Associates Inc. in Fort Lee, New Jersey, said today.

Shares of Hanesbrands, the largest U.S. maker of T-shirts and socks which are sold at Wal-Mart Stores Inc. and Target Corp. among other retailers, fell 42 cents to $25.16 at 4:03 p.m. in New York Stock Exchange composite trading.

Sara Lee, maker of Ball Park franks and Blueberry Crumble bread, completed the spinoff of Hanesbrands on Sept. 5 to concentrate on meats, breads and household products.

Hanesbrands said in October restructuring costs would total $250 million over the next three years as it invests in its Hanes, Champion, Playtex and Bali brands.


``When you're selling into a lower-income demographic, you need to promote as much as you can to get them to think about your product,'' Weintraub said after results were released.

Hanesbrands talked to retailers about the need to promote its products, Noll said on the call. ``I think that message is getting across,'' he said, without giving more details.

The company said sales this year, excluding acquisitions, should rise as much as 3 percent.

Hanesbrands also said it expects ``double-digit'' growth for diluted per-share earnings, excluding one-time items.

Hanesbrands plans to eliminate 2,185 jobs and close three plants in Mexico and the U.S. It's also closing its Ponce, Puerto Rico, textile factory, cutting another 500 jobs. The company bought its first Asian factory in Thailand in October. It employs 50,000, more than two-thirds of whom are outside the U.S.

The company changed its reporting calendar to end on the Saturday closest to Dec. 31.

(A replay of the company's conference call will be available after 2 p.m. New York time until Feb. 8 at 1-888-286-8010, passcode 41720684. International callers can dial +1-617-801-6888.)

To contact the reporter on this story: Mark Clothier in Atlanta at; Andria Cheng in New York at

To contact the editor responsible for this story: Michael Nol at

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