# Hanesbrands earnings beat expectations but weak guidance sinks stock

Earnings per share are expected to range from 24 cents to 29 cents, with adjusted EPS expected to range from 25 cents to 30 cents. The FactSet consensus is for 44 cents.

Hanesbrands also expects profitability headwinds that could hurt margins.

Read: Wrangler is selling its jeans from the rodeo to Nordstrom to drive price and demand

Hanesbrands’ new chief executive, Stephen Bratspies, said the company is conducting an “in-depth review,” which is looking at the global portfolio, supply chain and other business segments.

Bratspies, who joined Hanesbrands in August after previously serving as chief merchandising officer at Walmart Inc.
WMT,
+1.06%,
offered few details about the review, but gave a broad overview of what the company is examining.

“[I]n an environment where the pace of change is accelerating, for us to be successful and reach our full potential, we must become more a agile, consumer-centric, growth-oriented company,” he said, according to a FactSet transcript.

Among the goals Bratspies outlined was supporting the momentum of the Champion brand and supporting overseas businesses, like Bras N Things in Australia.

CFRA maintained its sell stock opinion and $8 price target for Hanesbrands.

“We hold concerns on Hanesbrands’ ability to meet consensus expectations in 2021 and 2022, due to the under-appreciated trend of mass retailers shifting toward private labels and tightening branded assortments,” Camilla Yanushevsky wrote in a CFRA note.

CFRA notes that Target Corp.
TGT,
+1.28%
ended its contract for C9 by Champion merchandise. Yanushevsky expects Walmart Inc. and Dick’s Sporting Goods to do so as well.

“This trend is accelerated with unprecedented store consolidation and exacerbated for Hanesbrands due to over-reliance on wholesale and under-development of its own digital site,” CFRA wrote.

See: Etsy stock has tripled in 2020 as lapsed shoppers return

More than three-quarters (76%) of Hanesbrands’ 2019 sales were through wholesale channels, CFRA said .

For the third quarter, Hanesbrands results exceeded expectations. Net income was $103.3 million, or 29 cents per share, down from $185.1 million, or 51 cents per share. Adjusted EPS of 42 cents was ahead of the FactSet consensus for 39 cents.

And sales of $1.81 billion were down from $1.87 billion last year but beat the FactSet consensus for $1.66 billion.

Stifel analysts think estimates for the fourth quarter were “overly-aggressive… following a strong 2Q beat.” Moreover, analysts say that Hanesbrands may have attracted “a fast-money investor base playing for upside in 2H” through personal protective equipment, or PPE, sales.

Stifel rates Hanesbrands stock buy with a $17 price target.

“We believe that Hanesbrands’ 3Q20 results signal a continuation of market share gains in its core categories driven by the company’s inherent competitive advantages of scale, strong brands, and in-house supply chain,” wrote Raymond James analysts.

” Furthermore, investors were likely surprised by management’s commentary on a strategic review, which creates volatility to results over the next year, especially if Hanesbrands elects to more aggressively reinvest in initiatives that could accelerate long-term market share gains.”

Raymond James rates Hanesbrands shares strong buy and cut its price target to $16 from $20.

Hanesbrands stock has slumped 10.2% for the year to date while the S&P 500 index
SPX,
+1.94%
has gained 8.7% for the period.