Shares of Hanesbrands HBI hit a new 52-week high of $7.03 yesterday before dropping to close at $6.85. Over the past three months, Hanesbrands shares have surged an impressive 47%, against the industry’s decline of 3.1%. The broader S&P 500 has risen 2.7% in the said time frame. This surge is attributed to Hanesbrands' resilience amid macroeconomic challenges.

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Technical indicators are also supportive of Hanesbrands’ strong performance. The stock is trading above both its 50-day and 200-day moving averages, indicating a robust upward momentum and price stability. This moving average is an important indicator for gauging market trends and momentum.

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HBI Stock’s Growth Strategy Fueled by Portfolio Reshaping Moves

Hanesbrands' decision to sell its Global Champion business for $900 million represents a strategic move aimed at strengthening the company’s balance sheet. By using the proceeds from this sale to reduce debt, Hanesbrands will significantly improve its financial stability. The approach will improve financial stability, allowing the company to focus more on its core businesses and invest in growth opportunities or operational improvements.

Another strategic approach Hanesbrands has taken is exiting the U.S. outlet store business, which will streamline operations and enhance profitability. By moving away from these lower-margin businesses, Hanesbrands has created a more focused and simplified business model. This strategic shift positions the company for more consistent top-line growth and higher profit margins, while also boosting its cash generation capabilities. This streamlined approach has strengthened its competitive moat and has provided multiple levers to unlock shareholder value over the coming years.

The key strategies for growth include transitioning to a modern technology platform and enhancing business analytics, forecasting and automation. Further, the company is refining its supply chain by closing several manufacturing and distribution facilities while maintaining the capacity needed for growth. This approach will simplify operations, reduce overhead and improve stock management for better customer service.

The company also aims to reduce non-revenue-generating expenses within SG&A overhead to create a more streamlined and efficient cost structure. These efforts, along with the previously mentioned strategies, position Hanesbrands to achieve an optimal cost structure, simplifying its operations and making the company more focused.

More on HBI Stock

Hanesbrands’ global consumer-centric approach has been helping the company acquire market share gains, driven by innovation, targeted at a younger consumer demographic and the successful expansion of permanent retail space. The company has strong visibility into new product launches and brand initiatives extending through 2026 with its innovation strategy. The growth in the innerwear segment was fueled by increased marketing investments and product innovation, with strong performance from the Hanes Originals and Maidenform M product lines. The company also launched Bali Breathe, making the brand’s most significant innovation in over a decade.

Estimates for HBI Stock: What’s on the Horizon?

Reflecting the positive sentiment around Hanesbrands, the Zacks Consensus Estimate for earnings per share has seen upward revisions as compared to the previous year. The revised estimates for the current and next fiscal year reflect significant anticipated growth, with projected year-over-year increases of 483.3% and 60%, respectively.

What Could Derail HBI Stock’s Momentum?

Despite all the positives, Hanesbrands continues to face challenges from a tough macroeconomic environment, including inflation, market uncertainties and weakened consumer demand. These factors have acted as deterrents to the company's performance, as seen in the second quarter of 2024 when net sales from continuing operations declined by 4%.

Hanesbrands expects the macro consumer landscape to remain difficult across its categories while anticipating improvements in year-over-year sales trends as it moves through 2024. For the third quarter of 2024, the company projects net sales from continuing operations to be in the range of $920-$950 million. The midpoint of this range indicates a nearly 3% year-over-year decline on a reported basis and an approximately 1% decline on an organic basis at constant currency.

For the full year 2024, Hanesbrands expects revenues to fall within the band of $3.59-$3.63 billion. The midpoint of this guidance suggests an almost 4% year-over-year decline on a reported basis and an approximately 2% decline on an organic basis at constant currency.

Is a Higher Valuation Sustainable?

With the stock steadily ticking up, the company is currently trading at a forward 12-month P/E multiple of 13.68X, exceeding the industry average of 12.58/X. Currently, HBI’s stock valuation seems pricey. Investors could face significant downside risks if the company's future performance does not meet expectations.

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How Should You Play HBI Stock?

Hanesbrands has achieved milestones with its recent stock performance reaching new highs. The company’s robust strategic transformations, consumer-centric approach and product innovation indicate growth prospects, though the ongoing macroeconomic challenges, expected declines in net sales and a lofty valuation raise concerns. Considering all factors, a hold approach might be prudent for those evaluating the stock. HBI currently carries a Zacks Rank #3 (Hold)

Three Better-Ranked Stocks to Consider

Some better-ranked stocks in the Consumer Discretionary space are Wolverine World Wide WWW, GIII Apparel Group GIII and Steven Madden, Ltd. SHOO.

Wolverine World Wide designs, manufactures and distributes a wide variety of casual and active apparel and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for WWW’s current financial-year sales indicates a decline of almost 23% from the year-ago reported figures. The consensus mark for EPS reflects significant growth to 85 cents from 5 cents reported in the prior year. WWW has a trailing four-quarter earnings surprise of 7.5%, on average.

G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It carries a Zacks Rank #1 at present.

GIII Apparel has a trailing four-quarter earnings surprise of 118.2%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 3.3% from the year-ago figure.

Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank #2 (Buy). 

The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 6.9% and 12.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.5%.

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Hanesbrands Inc. (HBI) : Free Stock Analysis Report

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