Basic apparel maker Hanesbrands recorded a diminished profit in its second quarter despite a slight sales increase, as the company continued to be impacted by historic high cotton costs.
The US company’s reported net profit of US$1.2m – down from $86.8m for the same period last year – was impacted by its sale of loss-making imagewear divisions earlier this year, but underlying figures also showed a profit decline of over 13%.
HanesBrands’ net sales were 1.18 billion dollars in the second quarter ended June 30, 2012. This was an increase of one percent over last year’s quarter. Earnings per diluted share were 0.67 dollars, a decrease of 14 percent. Outerwear segment net sales also increased one percent.
It blamed “substantially higher cotton costs” for the slump, but pointed to a stronger performance from its innerwear business, driven by growth in men’s underwear, children’s underwear and women’s panties and bras. Hanesbrands added that the majority of the cotton inflation was now behind it, leaving it to predict a stronger second half of 2012.
“Our business had a solid quarter, and we are performing slightly ahead of our plans for the year, especially in the innerwear segment,” said company chairman and CEO Richard Noll. “While we still have a long way to go, we are well positioned for the second half of the year.”
The company’s overall operating profit margin was 10.2 percent in the quarter, and its gross margin was 31.1 percent despite cotton costs of more than double those of the prior-year quarter.
Hanesbrands expects to report full-year earnings per diluted share of $2.50-2.60 on sales of $4.52-4.57bn.