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Hanesbrands 3Q profit rises on cost-cutting

November 2, 2011

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WINSTON-SALEM, N.C.—Clothing maker Hanesbrands Inc.'s third-quarter net income rose 48 percent, topping expectations despite disappointing revenue and a weak back-to-school season.

However, the maker of T-shirts and underwear issued a fourth-quarter outlook that fell short of Wall Street forecasts.

Hanesbrands said it expects fourth-quarter earnings of 47 cents to 57 cents per share on sales between $1.2 billion and $1.3 billion. Analysts were expecting 63 cents per share and $1.31 billion.

The shares rose 89 cents, or 3.5 percent, to close at $26.55 before the financial results and outlook were released. In after-hours trading, they were down $1.55, or 5.8 percent, to $25.

Net income in the quarter ended Oct. 1 rose to $90.8 million, or 91 cents per share, from $61.3 million, or 63 cents per share, a year earlier.

Revenue increased 5 percent to $1.23 billion from $1.17 billion.

Analysts surveyed by FactSet expected the company to earn 82 cents per share on revenue of $1.36 billion.

The company said it expected higher sales but was hurt by a surprisingly weak retail climate in the August back-to-school period. It said retailers are more tightly controlling inventory because of inflation.

The company raised prices on some products, notably underwear and socks, to offset rising cotton costs.

Cost of sales fell despite the increase in revenue. Among other factors, the company said it had lower customer-service costs than a year ago.

Cost-cutting allowed Hanesbrands to boost operating profit margin to 12.4 percent from 9.7 percent.