Shares of Hanesbrands Inc. HBI plummeted 20.7% in morning trading Thursday, putting them on track for the worst one-day performance in nearly 15 years, after the T-shirt and underwear seller eliminated its dividend and warned of a surprise first-quarter loss. The company reported before the opening bell fourth-quarter adjusted profit, which excludes nonrecurring items, of 7 cents a share, down from 44 cents a share, a year ago and below the FactSet consensus of 8 cents, while sales dropped 15.9% to $1.47 billion but was in line with expectations. For the first quarter, the company expects an adjusted per-share loss of 9 cents to 4 cents, compared with the FactSet consensus for earnings per share of 14 cents, as the company expects “muted” consumer demand amid economic uncertainty and margin pressure as it sells through the rest of its higher-cost inventory. Hanesbrands said it was eliminating its dividend, so it can use all of its free cash flow to accelerate the pay down of debt. The company last paid a quarterly dividend of 15 cents a share in November. At current stock prices, the annual dividend rate implied a dividend yield of 8.69%, which is more than 5 times the implied dividend yield for the S&P 500 SPX of 1.64%. The stock, which was on track for the biggest one-day selloff since the record 23.9% plunge on Dec. 11, 2008, has plunged 56.3% over the past 12 months while the S&P 500 has lost 9.6%.
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