VFC VF Corporation

Shares of Hanesbrands, Inc. (HBI) reached a new 52-week high of $83.48 on May 13, recording a healthy year-to-date return of 19.2%. Share prices have been soaring ever since the company reported solid first-quarter fiscal 2014 results on Apr 24, 2014 and provided a positive outlook for the fiscal year.

Growth Drivers

Though sales were slightly behind the Zacks Consensus Estimate, Hanesbrands’ first-quarter earnings per share of 76 cents shot up 49.0% from the prior-year quarter and also beat the Zacks Consensus Estimate by 31.0%.

Earnings growth was driven by higher margins on the back of the success of the ‘Innovate-to-Elevate’ strategy. Increased supply chain operating efficiencies, lower selling, general and administrative costs, and successful integration of the Maidenform Brands boosted profit during the quarter.

Hanesbrands expects the business momentum to continue and upped its guidance for fiscal 2014. The company now expects earnings per share in the range of $4.80 to $5.00 instead of $4.60 to $4.80. The company also expects operating profits within $665 to $685 million, up from $640 to $660 million expected previously.

Hanesbrands plans to stick to the Innovate-to-Elevate strategy that helped it to achieve higher unit selling prices and lower unit costs. The strategy has thus helped the company to increase its adjusted operating profit margin by 400 basis points over the past five years.

Further, Hanesbrands’ focus on innovation, higher-priced and higher-margin products, lower cotton costs and prudent expense management bode well for further profit increase.

Other Stocks to Consider

Hanesbrands sports a Zacks Rank #2 (Buy). Other stocks worth considering in the textile-apparel sector include Columbia Sportswear Co. (COLM) and V.F. Corporation (VFC). In the broader retail sector, Pinnacle Foods Inc. (PF) is also worth considering. All these stocks have the same Zacks Rank as Hanesbrands.

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