HBI Stock: Is It a Bargain at $7 per Share?

Apparel company Hanesbrands Inc. (HBI) issued its fourth quarter outlook below expectations, disappointing investors. The company expects adjusted EPS of 4 cents to 11 cents, below the FactSet consensus of 21 cents, and expects sales of $1.40 billion to $1.45 billion, below expectations of $1.60 billion.

Moreover, several analysts have downgraded the stock in the recent past. Wells Fargo analysts downgraded the stock from an “overweight” to an “underweight” rating. Moreover, Credit Suisse Group cut their target price on HBI from $15.00 to $13.00, while Citigroup lowered their price target from $14.00 to $11.00.

While the company is struggling with the tougher-than-expected sales environment amid deteriorating consumer sentiments, Steve Bratspies, HBI’s CEO, said, “We’re taking aggressive actions to manage through the near-term challenges as we execute the Full Potential strategy, which will put us in an advantaged position when the macroenvironment stabilizes.”

The stock has lost 5.2% over the past month to close the last trading session at $7.04. It has lost 56.3% year-to-date and 58.8% over the past year. The stock is trading at a discount. HBI’s forward EV/Sales of 1.08x is 4.7% lower than the industry average of 1.13x. Its forward Price/Sales of 0.41x is 51.4% lower than the industry average of 0.85x.

Here is what could shape HBI’s performance in the near term:

Weak Financials

HBI’s total net sales came in at $1.67 billion for the third quarter ended October 1, 2022, down 6.6% year-over-year. Its innerwear sales came in at $625.08 million, down 11% year-over-year, while its international sales came in at $502.07 million, down 6.4% year-over-year. Also, its operating profit came in at $141.44 million, down 39.7% year-over-year.

In addition, its net income came in at $80.10 million, down 47.2% year-over-year, while its EPS came in at $0.23, down 46.5% year-over-year.

Unfavorable Analyst Sentiment

For the quarter ending December 2022, HBI’s revenue is expected to decrease 19% year-over-year to $1.42 billion. Its revenue is expected to fall 9.1% year-over-year to $6.18 billion in 2022. 

Moreover, its EPS is expected to decline 86.4% year-over-year to $0.06 for the quarter ending December 2022 and 47% year-over-year to $0.97 in 2022. In addition, the stock missed its revenue estimates marginally for the third quarter.

POWR Ratings Reflect Bleak Prospects

HBI has an overall rating of D, equating to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. HBI has an F grade for Sentiment, consistent with unfavorable analyst sentiment. It has a D grade for Stability, in sync with its beta of 1.49.

In the 66-stock Fashion & Luxury industry, HBI is ranked #57.

Click here for the additional POWR Ratings for HBI (Growth, Value, Momentum, Quality).

View all the top stocks in the Fashion & Luxury industry here.

Bottom Line

The stock has lost significant investor attention over the past year. It is currently trading near its 52-week low of $6.40, which it hit on November 9, 2022. Although the stock is trading at an attractive valuation, I think HBI might be best avoided now, given its incapacitated financials.

How Does Hanesbrands Inc. (HBI) Stack up Against Its Peers?

While HBI has an overall POWR Rating of D, one might consider looking at its industry peers, J.Jill, Inc. (JILL), which has an overall A (Strong Buy) rating, and Movado Group, Inc. (MOV), Chico’s FAS, Inc. (CHS), and Caleres, Inc. (CAL), which have an overall B (Buy) rating.

HBI shares were trading at $6.93 per share on Thursday afternoon, down $0.38 (-5.20%). Year-to-date, HBI has declined -56.97%, versus a -15.93% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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