Hanesbrands (NYSE:HBI) Reports Sales Below Analyst Estimates In Q1 Earnings, But Stock Soars 6.1%

Clothing company Hanesbrands (NYSE:HBI) missed analysts' expectations in Q1 CY2024, with revenue down 16.8% year on year to $1.16 billion. On the other hand, the company expects next quarter's revenue to be around $1.36 billion, in line with analysts' estimates. It made a non-GAAP loss of $0.02 per share, improving from its loss of $0.06 per share in the same quarter last year.

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Hanesbrands (HBI) Q1 CY2024 Highlights:

• Revenue: $1.16 billion vs analyst estimates of $1.17 billion (1.6% miss)
• EPS (non-GAAP): -$0.02 vs analyst estimates of -$0.08 ($0.06 beat)
• Revenue Guidance for Q2 CY2024 is $1.36 billion at the midpoint, roughly in line with what analysts were expecting
• EPS (non-GAAP) Guidance for Q2 CY2024 is $0.09 at the midpoint, above analyst estimates of $0.09
• The company reconfirmed its revenue guidance for the full year of $5.41 billion at the midpoint
• Gross Margin (GAAP): 39.9%, up from 32.7% in the same quarter last year
• Free Cash Flow of $5.91 million, down 97.8% from the previous quarter
• Market Capitalization: $1.57 billion

A classic American staple founded in 1901, Hanesbrands (NYSE: HBI) is a clothing company known for its array of basic apparel including innerwear and activewear.

Apparel, Accessories and Luxury GoodsWithin apparel and accessories, not only do styles change more frequently today than decades past as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel, accessories, and luxury goods companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Sales GrowthA company's long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. Hanesbrands's revenue declined over the last five years, dropping 4.2% annually. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Hanesbrands's recent history shows its demand has decreased even further as its revenue has shown annualized declines of 11.3% over the last two years.

Hanesbrands also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 9.7% year-on-year declines. Because this number is higher than its revenue growth during the same period, we can see that foreign exchange rates have been a headwind for Hanesbrands.

This quarter, Hanesbrands missed Wall Street's estimates and reported a rather uninspiring 16.8% year-on-year revenue decline, generating $1.16 billion of revenue. The company is guiding for a 5.8% year-on-year revenue decline next quarter to $1.36 billion, a deceleration from the 4.9% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.

Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.

Over the last two years, Hanesbrands has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 2.6%, subpar for a consumer discretionary business.

Hanesbrands broke even from a free cash flow perspective in Q1. This quarter's result was in line with its margin in same period last year.

Key Takeaways from Hanesbrands's Q1 ResultsWe were impressed by how significantly Hanesbrands blew past analysts' EPS expectations this quarter. We were also glad its full-year earnings guidance exceeded Wall Street's estimates. On the other hand, its constant currency revenue fell short of Wall Street's estimates. Overall, this quarter's results still seemed fairly positive and shareholders should feel optimistic. The stock is up 6.1% after reporting and currently trades at $4.72 per share.