New Hanesbrands Management Turns Wells Fargo Bullish: What You Need To Know

Hanesbrands, Inc. HBI appears to be making a turnaround after several years of disappointing acquisitions and decision-making, according to a Wells Fargo. 

The Hanesbrands Analyst: Ike Boruchow upgraded Hanesbrands from Equal-Weight to Overweight and increased the price target from $20 to $23.

The Hanesbrands Takeaways: In the last year, Hanesbrands made significant changes to its management team, appointing ex-Walmart Inc WMT executives to the company’s C-suite and board of directors, strengthening ties between Hanesbrands and one of its top customers, Boruchow said in a Tuesday upgrade note. 

Over the next several years, the company will be doubling its marketing spend — particularly in the digital space — to 4% of sales and plans to increase its capex by around $100 million to $185 million, the analyst said.

The goal is to increase “speed to market capabilities” and create a platform for better consumer data capture, he said, adding the investment in brand and data development is a “critical component to achieve the long-term top-line growth objectives.”  

Hanesbrands “owned manufacturing and scale allows the company to price product competitively without undermining its margin structure,” benefiting Hanesbrands in terms of market share, as the company can control the flow of its inventory better than its peers, Boruchow said. 

From 2013-2016, Hanesbrands closed five acquisitions greater than $100 million that negatively affected EPS and proved detrimental to the company, the analyst said.

The new management team intends to divest non-core businesses, put M&A activity on hold through 2024 and focus on “the most sustainable, fastest growing and highest margin businesses,” he said. 

Well's Fargo's $23 price target represents a 10.5x multiple on FY2022 EV/EBITDA forecasts. 

HBI Price Action: Hanesbrands was up 0.69% to $18.25 at last check Tuesday.