Essential apparel maker Hanesbrands, Inc. (NYSE: HBI)
shares have been underperforming the benchmark S&P 500 index (NYSEARCA: SPY)
since the rally commencing in the last week of March 2020. Shares saw an acceleration in June surging to a peak of $14.01 on a June 9, 2020, on the appointment of its new CEO Stephen B. Bratspies. While consumer apparel stocks have been some of the worst beaten up shares, essential apparel like underwear, socks, and face masks tend to carry more significance during pandemic times and stay-at-home periods. The lifting of isolation mandates is a driver that can help HBI shares turn the corner as both a rare dual narrative pandemic and post-pandemic apparel play. Shares have since pulled back to provide investors with opportunistic price levels to consider adding to risk-tolerant portfolios.
Q1 2020 Earnings Release
On April 30, 2020, Hanesbrands reported its Q1 2020 results for the quarter ending March 31, 2020. The Company reported earnings per share (EPS) of $0.05 missing consensus analyst estimates of $0.12 per shares, by (-$0.07). Topline revenues fell (-17.2%) year-over-year (YoY) to $1.32 billion missing consensus estimates of $1.33 billion. The pandemic caused disruptions to retailer operations causing the Company to prioritize new initiatives of develop personal protective garments like face masks, accommodate operating sales channels, preserve cash and enhance liquidity. The Company pulled its full-year 2020 guidance due to the uncertain business climate and its effects on global economies. Markets reacted by selling off shares by nearly (-25%) plunging from prerelease highs of $10.49 to $7.71 post-earnings in the following two weeks. Needless to say, the bar has been set low heading into Q2 2020 earnings. However, the narrative took a strong reversal into June 9, 2020 with the appointment of a new CEO.
Pandemic and Post-Pandemic Gainer
Hanesbrands business has been in a downward trajectory coming into 2020. The lower end underwear and the athleisure brand has been overshadowed by higher-end brands like Lululemon Athletica (NASDAQ: LULU). However, the byproduct effects of the spread of COVID-19 changed the climate for Hanesbrands products to create a demand surge for lower cost essential wear due to the uncertain economic climate. The stay-at-home mandates accentuate comfort over style playing right into Hanesbrands line of brands including Champion, Playtex, L’eggs, Wonderbra, and Bali. While mall-based clothing retailers were forced to shut down with the isolation mandates, Hanesbrands products continued its distribution through retail stores like Target (NYSE: TGT) and Walmart. While sales are expected to have declined in Q2 2020, the market have be overly negative on upcoming results. As the restart continues to expand, Hanesbrands should see more distribution channels re-open.
Sell The News CEO Reaction
Incidentally, shares rallied into the announcement of the new CEO of Hanesbrands Stephen B. Bratspies. Bratspies was the former Chief Merchandising Officer of retail behemoth Walmart Inc. (NYSE: WMT) . The reaction was clearly a sell-the-news event as shares peaked at $14.01 before taking a more than (-30%) plunge to a low of $10.28 in the following two weeks. The prior low expectations for the upcoming Q2 2020 earnings may have reversed with the inclusion of the new CEO. Risk tolerant investors may watch for opportunistic pullback levels to consider scaling in some shares without chasing.
Hanesbrands Price Trajectories
Using the rifle charts on monthly, weekly, and daily time frames provides a broader view of the landscape for HBI stock. The bullish weekly market structure low (MSL) triggered above $10.24 with a monthly MSL trigger above $11.41. However, rival market structure high (MSH) sell triggers also line the playing field. The daily MSH triggers under $12.55 and weekly MSH triggers under $11.03. The monthly stochastic is crossing up off the oversold 20-band setting up a channel tightening towards the weekly 15-period moving average (MA) at the $13.37 Fibonacci (fib) level. The monthly 5-period MA support sits at $10.08. The weekly stochastic mini pup activates above its 5-period MA $11.58, which is likely with the daily stochastic cross up through the 20-band. If the weekly 5-period MA can’t establish a close above the 5-period MA, then a tightening back towards the $9.91 fib is possible. This sets up potential opportunistic pullback levels at $10.97 fib and weekly MSH trigger range, $10.24 weekly MSL trigger, $9.91 fib and $8.86 fib. Upside trajectories sit at the monthly 15-period MA $13.37 and weekly upper BBs near $15.09. Based on the sell the new reaction to the new CEO, be careful not to chase shares ahead of Q2 2020 earnings as a similar reaction could ensue. It’s best to patiently await opportunistic pullbacks even if it means waiting through the earnings reaction.
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