Hugging the Consumer Just Right; Hanes Goes Green, Warnaco Expands

Undergarments, a longtime necessity for the American consumer, have become a powerful force of their own in the merchandising world. Retailers such as Hanesbrands HBI and Warnaco Group WRC have largely dedicated part of their sales, marketing and advertising towards intimate apparel. As this growing industry continues to flourish and develop, new and improved product offerings have become a necessity for success. Take Hanes, for example. The bra, panty and underwear seller has capitalized on the sale of intimate apparel, increasing sales with a compound annual growth rate of about 9% per year. Hanes has unlocked the secret to consumer loyalty with inexpensive garments that resist wear and tear while remaining comfortable and stylish, but that's not all. In recent years, Hanes launched ecofriendly initiatives to appeal to its “green” customer base and promote energy efficiency. With inventiveness often comes recognition, and Hanes has experienced just that for its sustainable efforts. According to marketwatch.com, the U.S. Environmental Protection Agency [EPA] honored the retailer for the third consecutive year on March 15 with its Energy Start Partner of the Year award. “Sustainability is very important to our consumers, and we hope they take comfort in the fact that Hanes is doing its part for the environment," said Hanes Chief Branding Officer, Sidney Falken. "We are proud of our commitment to environmental responsibility and the significant progress and accomplishments our company has made in recent years; however, we know we have the potential to achieve even more in this area and we are committed to doing so to benefit future generations.” Along with the EPA, consumers and analysts agree that Hanes is the No. 1 brand when it comes to intimate apparel. Americans have placed Hanes far ahead of its foremost competitor, Fruit of the Loom, according to Brean Murray Carret. “For women's bras and panties, Hanes represents the premium brand over Fruit of the Loom in the mass channel, receiving an approximate 35% higher price point,” Brean Murray Carret said in a research report published today. “For men's, Hanes remains the premium brand across the mass channel, approximately 20% higher than its closest competitor, Fruit of the Loom.” However, Hanes does not monopolize the underwear market just yet. Warnaco's Calvin Klein brand correlates more with the younger generation's style/fit trends. In an effort to expand the already well-known brand, Warnaco recently announced at its Analyst Event, (March 22) that it plans to grow Calvin Klein's business considerably in coming years, as well as implement a Chief Creative Officer position. “By brand, management expects to hit its target of $4.0 billion in revenue by 2016 by growing its Calvin Klein business from $1.9 billion to $3.1 billion and by growing its heritage brands from $0.6 billion to $0.9 billion,” Piper Jaffray explained in a recent research report. “Major growth initiatives for Calvin Klein center around expanding its direct to consumer business in Asia and Latin America, with management projecting flat growth domestically for the brand as it continues to strategically reduce its presence in off-price channels.” Another expanding retailer, one that most certainly cannot go without being mentioned, is the ever-popular Victoria's Secret LTD lingerie brand. Limited Brands plans to buy space for the PINK supplier in the U.K., the Middle East and Canada over the next few years in order to grow the already $1.2B business. It is apparent that the underwear business has pulled itself up to the top of retail priority for the consumers over the years. With expansion and innovation more prominently making its way into the market, retailers have positioned themselves in a wedgie-free zone. Hanesbrands is currently trading at $29.75, up +15.2% YOY. Warnaco Group is currently trading at $58.00, up +4.04% YOY. Limited Brands is currently trading at $49.70, up +1.41% YOY.