Hanesbrands Inc. (HBI), Maidenform Brands, Inc. (MFB): Investing in Underwear Could Help Your Portfolio

Maidenform Brands, Inc. (NYSE:MFB) currently outsources all of its manufacturing to third parties, whereas Hanesbrands manufactures approximately two-thirds of its own bra products. By plugging all Maidenform Brands, Inc. (NYSE:MFB) brands into its own manufacturing facilities, Hanesbrands can also cut manufacturing costs.

Hanesbrands has also been actively pursuing its “Innovate to Elevate” strategy. These are typical cost-cutting and margin/profit improving exercises, which are necessary to counteract macroeconomic headwinds. It aims to reduce input costs, strengthen its brand value, and thus provide a value-added product with higher margins. It is also exiting non-core businesses, closing under-performing segments, and changing the product mix to enhance performance.

A better buy

One of the main rivals of Hanesbrands is L Brands Inc (NYSE:LTD), the owner of Victoria’s Secret. Victoria’s Secret is the biggest threat to Hanesbrands and Maidenform, as it has more than 1,000 stores across the globe. L Brands Inc (NYSE:LTD) is also expanding its various businesses, such as PINK, Henri Bendel and VSX, which could lead to stiffer competition for Hanesbrands. But Hanesbrands looks cheaper than L Brands on a trailing basis, and that too by some margin.

While L Brands trades at a trailing P/E multiple of almost 23x, Hanesbrands trades at a much cheaper 16.6x. L Brands is expensive on other metrics as well, with a PEG ratio of 1.7, while Hanesbrands has a PEG ratio of just under 1.0. So Hanesbrands trades at a cheaper multiple, but it should also be noted that L Brands is witnessing superior growth. Its comparable-store sales grew 6% in the recent quarter.

But investors looking for a cheaper option might consider Hanesbrands, and they won’t be wrong in doing so. Hanesbrands’ cost-cutting initiatives and latest acquisition should help it perform better in the future. 

Conclusion

After a dazzling performance so far this year, I think that Hanesbrands can do even better as it executes its strategies and benefits from its Maidenform acquisition. The stock is not too expensive either, and it is worthy of further research by investors looking to make a new addition to their portfolio.

The article Investing in Underwear Could Help Your Portfolio originally appeared on Fool.com and is written by ANUP SINGH.

ANUP SINGH has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.