Like many companies in the consumer discretionary stocks sector, Hanesbrands (NYSE:HBI) has seen its stock price slowly decline over the years as an indirect effect of the overall decline of apparel retailers hit by the rise of e-commerce alternatives.

Has this storied company with well-known brands finally run out of steam? Or is there potential in its future?

Let's dissect what Hanesbrands has to offer investors today.

The front of the corporate headquarters of Hanesbrands with its HBI logo in front.

Image Source: Hanesbrands.

What's attractive about Hanesbrands

This veteran apparel company sports a number of compelling characteristics. Its Champion brand of athletic wear is currently the company's crown jewel, exhibiting 26% year-over-year growth in Q3 global sales. Hoping to build on that popularity, CEO Gerald Evans noted during the Q3 earnings call that Hanesbrands is redesigning the Champion e-commerce site to emphasize support for mobile devices. This is a key strategic move given that nearly 40% of U.S. e-commerce sales took place on mobile devices in 2018.  

In another move to capitalize and expand Champion's growth, Hanesbrands announced this month that Champion was getting into the e-sports apparel business, which makes sense considering that nearly 400 million viewers worldwide watched e-sports events last year.

Helping to fuel Champion's success is the company's increase in international sales. Here Hanesbrands saw a year-over-year increase of 7%. Hanesbrands will continue its international growth and has plans to open more than 200 Champion stores in Asia.

In addition, the stock offers a healthy dividend yield of 3.95%, and an attractive P/E hovering around 9. Net income has steadily grown over 2019 from $79 million in Q1 to $188 million in Q3, and along with that, earnings per share has also grown from $0.22 in Q1 to $0.51 in Q3. 

Hanesbrands is improving its financial health as well. Operating cash flow grew 47% year over year in Q3 while net debt was reduced by nearly half a billion dollars over the same period. Furthermore, the current U.S. trade war with China has minimal impact on the company. It does not own manufacturing operations in China and its exposure through third parties represents less than 3% of U.S. costs. 

Chinks in Hanesbrands' armor

The company is known for its namesake underwear, and that's the source of its depressed stock price. Its domestic innerwear line has struggled, with year-over-year sales down 3.5% in Q3, and next year brings new challenges as its relationship with Target (NYSE:TGT) comes to an end. CFO Barry Hytinen blamed part of the decline on retailer bankruptcies, and this "retail apocalypse" may continue.

Moreover, since its international business plays a key role in its success, the company is vulnerable to currency fluctuations and hints of a global economic slowdown. That, combined with the company's reliance on the Champion brand to fuel its growth, brings into question whether Hanesbrands has a sufficiently diversified business, given the decline in its innerwear line, to weather a downturn should Champion fall out of favor with consumers.

The Foolish finale

Despite the declines in its innerwear line, Hanesbrands raised the midpoint of its 2019 revenue guidance because of stronger-than-expected performance in the company's Champion and international businesses. This guidance already incorporates factors like the end of its relationship with Target. 

This move, coupled with the company's focus on improving its overall financial health, is encouraging. In fact, Evans mentioned share buybacks as a potential option on the table for next year because of the company's improving finances. Given the trends in the current business despite the impact of the retail apocalypse, Hanesbrands is positioned to continue its growth well into next year. Combined with its compelling dividend and P/E, that makes Hanesbrands look like an attractive value stock for investors.