Is Hanesbrands Inc. (HBI) Emerging As a Stronger Company?

Despite the headwinds, the company has maintained strong margins with a five year annual growth rate of 6.5% in gross margins. The company focuses on four pillars for growth: increasing sales of existing stores, opening up new stores, using e-commerce and franchising to achieve its fourth pillar of international expansion. Express, Inc. (NYSE:EXPR) increases existing store productivity through deeper selection of fashion essentials, improved pricing, more effective marketing and introduction of new categories to boost sales. E-commerce sales as a percentage of total sales have grown from 5% in 2007 to 12.6% in 2012. This increase was achieved through optimizing digital marketing, improving analytics and operations and driving sales through new capabilities.

Conclusion

The acquisition is expected to result in substantial value creation for the retailers, customers and shareholders of Hanes. It is also currently undervalued with a P/E (ttm) of 18.9 compared to the industry average of 25.6. The company does not have a history of paying out dividends and tends to provide return to its investors only in the form of price increase only. In my opinion, the stock is an immediate buy for a term of minimum three years.

Express is currently in its growth phase. The company is yet to cover many untapped markets. With its rigorous strategies to widen its product range and expand geographically within the U.S. and abroad, the company is expected to register higher returns in the future as well. Express also provides return to its investors in the form of price appreciation. I would advise buying this stock.

The article Is Hanesbrands Emerging As a Stronger Company? originally appeared on Fool.com and is written by Awais Iqbal.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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