Hanesbrands Withdraws View, Draws From Credit Amid Coronavirus
Zacks Investment Research | Mar 25, 2020 10:28PM ET
The coronavirus pandemic has rattled most sectors across the globe, with the apparel space being no exception. Incidentally, Hanesbrands Inc. (NYSE:HBI) has issued a business update, including the withdrawal of its guidance. Due to the outbreak and its impact on revenues and costs, management has withdrawn first-quarter and 2020 guidance, which was issued along with fourth-quarter results on Feb 7.
Management in its last earnings call stated that, for the first quarter of 2020, it anticipates the top line in the range of $1.466-$1.496 billion. The midpoint of guidance suggested a decline of 7% from the year-ago quarter’s reported figure. Moreover, the company had projected adjusted earnings of 23-26 cents per share. The midpoint of this guidance suggested a decline of nearly 7% year over year.
For 2020, net sales were envisioned in the range of $6.675-$6.775 billion. Further, the company had anticipated adjusted earnings of $1.72-$1.80. At the midpoint, the guidance for 2020 indicated year-over-year growth of 3% in net sales and 15% in adjusted earnings. For now, management refrained from providing any update and hopes to provide additional information for the same when it reports first-quarter earnings in May.
We note that rising concerns related to the coronavirus outbreak have derailed the economic activities worldwide. Companies are bearing the brunt of supply-chain bottlenecks due to travel restrictions imposed to contain further spread of the deadly virus. The outbreak has caused people in most cities to stay indoors, resulting in lower store traffic. In response to the pandemic, companies are either shutting stores or trimming work hours. Several companies have cautioned about their upcoming revenues and earnings results as well.
Speaking of store closures, many textile and apparel companies like lululemon athletica inc. (NASDAQ:LULU) , Columbia Sportswear Company (NASDAQ:COLM) and Ralph Lauren (NYSE:RL) have recently closed stores due to the coronavirus outburst.
In its latest release, HanesBrands informed investors that in an attempt to enhance its financial flexibility amid the coronavirus outbreak, it is drawing down $630 million under its U.S. revolving loan facility. Including the revolver drawdown, the company’s cash in hand is expected to be nearly $1 billion. Also, the company is on track with reducing expenditure and managing liquidity during the crisis.
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While the company is witnessing adverse impacts on economic activities in all regions it operates, management has been undertaking several measures to protect its workers.
We note that shares of this Zacks Rank #3 (Hold) company have plunged 48.1% in the past year compared with the Zacks Investment Research
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