(Reuters) - Underwear maker Hanesbrands Inc (HBI.N) plans to exit its unbranded apparel business in the United States and sell its Outer Banks sportswear label as it seeks to prop up falling margins.
Hanesbrands said it would also sell its European wholesale casualwear division to an affiliate of Dutch consumer goods company Smartwares B.V. for 15 million euros ($18.80 million).
Analysts lauded the company’s move to narrow the focus of the imagewear segment, which sells both branded and private label apparel to wholesalers that print designs on them. The business accounts for 8 percent of the company’s sales.
“We view Hanesbrands’ exit of the imagewear business as a positive as it is not a core business (and) has proved to be volatile and unprofitable,” Citi analyst Susan Anderson wrote in a client note.
Hanesbrands, which recently reported a quarterly loss for the first time in two years, will continue to sell its higher-priced branded printwear to U.S. wholesalers, mainly under the Hanes and Champion labels.
Rising costs of raw materials such as cotton have been eroding Hanesbrands’ profitability. The company’s gross margins have slipped by more than 9 percentage points over the last two quarters, according to Thomson Reuters StarMine data.
The restructuring will hurt sales by $60 million, mostly in the second half, but will not have a significant impact on operating profit.
Hanesbrands, which competes with Limited Brands Inc LTD.N and Maidenform Brands Inc MFB.N, expects non-cash pretax charges of $85 million to $95 million in the second quarter related to the restructuring.
The company reiterated its previous 2012 earnings forecast of $2.50 per share to $2.60 per share.
Hanesbrands’ shares were trading at $27.76 on Wednesday on the New York Stock Exchange.
Reporting by Meenakshi Iyer in Bangalore; Editing by Maju Samuel and Saumyadeb Chakrabarty