Hanesbrands, Inc. (NYSE:HBI)

CAPS Rating: 3 out of 5

The Company designs, manufactures, sources and sells apparel essentials products such as t-shirts, bras, panties, men's underwear, kids' underwear, socks, hosiery, casualwear and activewear.

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Player Avatar kwpmp (< 20) Submitted: 9/25/2008 5:19:24 PM : Outperform Start Price: $22.63 HBI Score: +300.63

I disagree that Hanes is entirely commoditized: it isn't Gucci, but you are still paying for the brand. Shoppers recognize the relative quality you get for the price, and thats why, simply put, they are #1 or #2 in EVERY product segment they are in. Also, even though their share price hasn't fared so well, they have really taken advantage of the current economic situation: their variable debt (the biggest concern of an HBI investment) has recently been locked in at current rates for the next few years. This is going to reduce interest expense almost 100m.

Moreover, they have huge room for margin improvement. Look at Gildan. Their top line growt is fine, but they've become such a powerhouse with their industry-leading gross margins. Hanes, on the other hand, is consistently introducing compatible product and product lines and co-branding and co-selling efforts (the former with Disney and the latter with Wal-Mart, Zellers, etc.). But, they have huge room for margin improvement, and their new strategy allows them to increse margins by 50-100 bps PER YEAR for the next 3 years.

Bottom line growth is gonna move this one.

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