No Champion Update as Hanesbrands Posts Slightly Wider Q1 Loss
Hanesbrands Inc.’s solution to recapturing profits in innerwear is a strategy that focuses on consumer-centricity.
The innerwear manufacturer said the strategy is working. Innerwear sales for the quarter ended March 30 were down 8 percent from year-ago levels to $506.8 million, slightly below the company’s expectations due to higher-than-expected inventory management actions by select retailers. More importantly, the consumer-centricity focus shows both point-of-sale trends and market share gains—50 basis points in the first quarter—that were ahead of company expectations, Hanesbrands said. Those gains were across men’s, women’s and both younger and older consumers. The company said operating margin of 21.9 percent was helped by cost-cutting initiatives and lower input costs as commodity and ocean freight inflation eased in the quarter.
More from Sourcing Journal
Looking ahead, CEO Stephen Bratspies told investors: “We’re launching new consumer-led innovation, including Maidenform M, Bonds Shape Of and the second phase of our successful Hanes Originals platform called SuperSoft.”
Bratspies said the company has a “robust product pipeline,” with 2024 another record year of innovation. “As a result of our strategic work over the last three years, our brands are healthier, our product pipeline is full and is resonating with consumers, our gross margin is back to historical levels,” he told investors.
The problem child in Hanesbrands’ portfolio is its activewear business, largely its distressed Champion brand. Sales for the category dropped 30.9 percent, or $97 million, to $217.7 million from a year ago. Two-thirds of the decline was due in part to a shift in the Champion’s kids’ business to a licensing model and an unseasonably strong collegiate sales performance in the comparable year-ago quarter. Hanesbrands said the challenging activewear apparel market dynamics continued in the quarter, which included soft consumer demand and cautious ordering from retailers. The company said it has taken steps to strengthen the Champion brand ahead of the new Fall-Winter 2024 product line.
Hanesbrands didn’t provide an update on the sale of Champion, and Bratspies only said that the review of strategic alternatives for the global Champion business is “progressing as expected.” Sourcing Journal’s sister publication WWD noted last month that Hanesbrands has an informal working framework in which Champion would be acquired by Authentic Brands Group for a little more than $1 billion. Since then, there’s been no confirmation that the parties have finalized the terms for a formal purchase agreement. Authentic Brands first surfaced last November as a possible contender to acquire the M&Ms collaborator.
For the quarter, the company posted a slightly wider net loss of $39.1 million from $34.4 million last year, on total sales that fell 16.8 percent to $1.16 billion from $1.39 billion. Total sales include a 12.3 percent slide in international sales to $406.0 million.
Efforts over the past three years include building new capabilities around brand building, data analytics, and inventory management, while Hanesbrands has also streamlined its supply chain. Bratspies said those initiatives have helped the company create a “flywheel for shareholder value creation, one that we believe positions us over the next several years to accelerate earnings growth.”
UBS softlines analyst Jay Sole has a “Neutral” rating on shares of Hanesbrands. While first-quarter results point to gains in its turnaround efforts, Sole said he couldn’t be more positive on the stock because the company’s Fiscal Year 2024 guidance hinges on an acceleration in the back half of the year “during a period where the macro environment remains skittish.”
Hanesbrands guided full-year net sales to the range of $5.35 billion to $5.37 billion, with GAAP earnings per share (EPS) between 22 cents and 28 cents. For the second quarter ending June 29, net sales were forecasted at between $1.34 billion to $1.38 billion, with GAAP EPS between 2 cents and 6 cents.
Hanesbrands in February cut 159 jobs after deciding to suspend operations at its Annapolis distribution center in Winston-Salem, N.C.
