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Buy HanesBrands For The 5.7% Yield And Turnaround Potential

Published Mon, 29 Jun 2020 09:01:00 -0400 on Seeking Alpha

Seeking AlphaDividend Ideas | Consumer Buy HanesBrands For The 5.7% Yield And Turnaround PotentialJun. 29, 2020 9:01 AM ET|| About: Hanesbrands Inc. (HBI)by: Josh ArnoldJosh Arnold Long/short equitySummaryHBI trades well off its pre-crisis highs.
With a sizable yield and cheap valuation, it looks attractive.
I think HBI is pricing in lots of weakness, tipping the scales towards the bulls.

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Apparel retailer and wholesaler HanesBrands (HBI) has had a rough go of it in the past few years. A slew of acquisitions meant to boost growth simply haven’t, and the company’s share price has reflected that reality. The COVID-19-related shutdowns across the US this year haven’t done any favors for HanesBrands either, and the stock is well off of its pre-crisis highs.

Still, HanesBrands pays an enormous dividend and according to my work, the dividend looks safe. Further, if we look out into 2021 and beyond, when results should normalize, HanesBrands is very cheap. This combination makes it worth a look on the long side for investors that want high levels of income, and are value-seekers.
2020 will be tough, but brighter days are ahead
HanesBrands has 229 of its own stores in the US, and it is a wholesaler to a wide variety of other retailers that sell Hanes products on their shelves. The company is therefore quite beholden to foot traffic and retail spending for consumers to buy its products.
Thus, when COVID-19-related shutdowns hit, Hanes saw its revenue plummet. Q1 sales declined 17% thanks to these shutdowns, and Q2 promises to be worse for the same reason. However, the company reckons sales would have grown by 1.6% in Q1 were it not for the impact of COVID-19, currency impacts, and divestitures. In other words, things aren’t quite as bad as they would seem on the surface.

Source: Seeking Alpha
That’s a good thing because on the surface, it’s pretty ugly, as we can see above. Revenue is expected to fall... Read more