Summary
Hanes has fallen 63% from its all-time high due to recent headlines.
Its Champion brand is thriving and is well-positioned to continue its momentum.
A discounted cash flow analysis suggests that the company is undervalued by 45-70%.
It is no secret that Hanes Brands' (HBI) star subsidiary, Champion, has blossomed into a brand with accelerating acclaim both domestically and internationally. The older readership on Seeking Alpha is likely no stranger to the Champion brand, which this year celebrates its centennial. However, today's Champion is experiencing a well-documented transformation, as the parent company focuses on avenues through which it can elevate the brand and run with its newfound momentum.
Champion
In my eyes, Hanes is really a Champion story, and thus it is vital to visit the numbers and quantify how material the brand is to the parent company. To prove that Hanes' success hinges significantly upon this single brand, I challenge you to read Hanes' Q3 2018 conference call and take a shot each time the words "Champion" and "accelerated," "drove," "increased," or "exceeded" appear in the same sentence.
I utilized Google Trends to show the resurgence of this 100-year-old brand. I seasonalized Google's data by quarter to show a less-noisy, truer picture of people's searches for the brand (shown below in blue). Also charted is Hanes' stock price over the same five-year period. This juxtaposition illustrates an interesting divergence between Hanes' stock price and the exponentially increasing interest in the Champion brand. Champion is approximately 20% of Hanes' total revenues, which is certainly large enough to demand attention.
