Hanesbrands (NYSE:HBI) Misses Q4 Sales Targets
Clothing company Hanesbrands (NYSE:HBI) fell short of analysts' expectations in Q4 FY2023, with revenue down 12% year on year to $1.30 billion. Next quarter's revenue guidance of $1.16 billion also underwhelmed, coming in 11.5% below analysts' estimates. It made a non-GAAP profit of $0.03 per share, down from its profit of $0.07 per share in the same quarter last year.
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Hanesbrands (HBI) Q4 FY2023 Highlights:
- Revenue: $1.30 billion vs analyst estimates of $1.36 billion (5% miss)
- EPS (non-GAAP): $0.03 vs analyst estimates of $0.09 (-$0.06 miss)
- Revenue Guidance for Q1 2024 is $1.16 billion at the midpoint, below analyst estimates of $1.31 billion
- Management's revenue guidance for the upcoming financial year 2024 is $5.41 billion at the midpoint, missing analyst estimates by 3.6% and implying -4% growth (vs -9.6% in FY2023)
- EPS (non-GAAP) Guidance for 2024 is $0.45 at the midpoint, below analyst estimates of $0.48
- Free Cash Flow of $266.1 million, up 74.1% from the previous quarter
- Gross Margin (GAAP): 38.1%, up from 35.2% in the same quarter last year
- Market Capitalization: $1.65 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 Goods
Within 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 Growth
Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Hanesbrands's revenue declined over the last five years, dropping 3.7% annually. 
Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. 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 9% 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 6.8% 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 12% year-on-year revenue decline, generating $1.30 billion of revenue. The company is guiding for a 16.5% year-on-year revenue decline next quarter to $1.16 billion, a deceleration from the 11.8% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 1% over the next 12 months.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Hanesbrands broke even from a free cash flow perspective, subpar for a consumer discretionary business.
Hanesbrands's free cash flow came in at $266.1 million in Q4, equivalent to a 20.5% margin and up 190% year on year.
Key Takeaways from Hanesbrands's Q4 Results
We struggled to find many strong positives in these results. Revenue declined fairly significantly year on year and missed expectations on both a reported and organic basis. Full-year revenue and EPS guidance fell short of Wall Street's estimates. Overall, the results could have been better. The company is down 4.5% on the results and currently trades at $4.5 per share.
Hanesbrands may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
