Summary
Hanesbrands meets neither of my two main investment criteria.
Its moat is dwindling as the landscape is changing to e-commerce.
The business has a tough road ahead.
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Two key aspects around my investment decision framework are: Does the company have a strong competitive advantage, and does it have a reasonable valuation? Hanesbrands (HBI) doesn't have either in my opinion. A deleverage story is great, while collecting some dividends along the way, but at the current enterprise value the free cash flow yield isn't attractive. In addition, strong brand awareness has its difficulties as a competitive advantage in today's online environment.
Quick Business Background
Hanesbrands is a leading global manufacturer that markets and distributes innerwear and activewear apparel.
Innerwear = Bras, panties, underwear, socks, etc.
Activewear = T-shirts, sports bras, sweatpants, etc.
The business was spun out of Sara Lee Corp back in 2006 with $2.6 billion in debt. Over the last 5 years the company has been on an acquisition spree and reason for the ballooning debt balance.
