HanesBrands, a leading producer of branded basic apparel, has reported third-quarter net sales increased 3%, earnings per diluted share for continuing operations increased 31% to $1.11, and free cash flow totalled $287 million.

Net sales for the quarter ended 29 September 2012, totalled $1.22 billion, up from $1.19 billion a year ago. EPS growth contributors included Innerwear segment performance and across-the-board tight expense control.

For 2012 full-year guidance, the company increased the low end of its EPS range by 4 cents to $2.54 to $2.60. It expects net sales of approximately $4.52 billion and free cash flow of approximately $500 million, the high end of its previous range.

“We are executing well and had a very good quarter as reflected in our operating margin, free cash flow and EPS, all of which are all-time quarterly records,” Hanes Chairman and Chief Executive Officer Richard A. Noll said. “Cotton inflation is behind us, and we are generating momentum for continued growth.”

Third-quarter business highlights

The company’s overall operating profit margin increased 60 basis points to 12.8% in the quarter, reflecting continuous sequential improvement since the first quarter. Selling, general and administrative expenses decreased as a percentage of net sales, mitigating the impact of higher cotton costs.

The company generated free cash flow of $287 million in the quarter and has now completed the retirement of approximately $300 million of floating-rate bond debt as planned in 2012.

Innerwear segment net sales increased 3% in the quarter and operating profit increased 10%. Excluding sales declines to a mid-tier retail customer that is undergoing a major strategic shift, Innerwear sales would have increased 5% in the third quarter versus last year.

Innerwear sales growth has increased for three consecutive quarters in 2012. The 3% growth in the third quarter built on 2% growth in the second quarter and 1% growth in the first quarter. Hanes and Champion underwear combined for double-digit growth and women’s panties growth was in the mid-single digits.

New-product innovation also contributed to growth, including Hanes ComfortBlend men’s underwear, Hanes Classics slim fit and stretch premium underwear T-shirts, and Bali and Barely There Smart Size seamless bras.

Outerwear segment net sales increased 5% in the quarter, while operating profit declined 4%. Sales for Champion activewear and Gear for Sports licensed apparel increased, but higher cotton costs suppressed segment operating profitability.

International segment net sales declined 3%, while increasing 2% on a constant currency basis, and operating profit increased 19% on a reported basis.

Net sales for the Direct to Consumer segment increased 2%, and operating profit increased 18%.

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