Debt-Saddled Hanesbrands Might Sell Champion
A “for sale” sign might be coming to Champion.
Hanesbrands Inc. on Tuesday said it’s eyeing a “broad range of alternatives” for the activewear brand, after activist investor Barington Capital urged the North Carolina apparel company to shave down its $3.6 billion debt bill last month.
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Though it might end up keeping Champion, the Hanesbrands board is mulling a sale or “other strategic transaction” focused on driving value for shareholders, the company said in a statement.
According to Hanesbrands chairman Ronald L. Nelson, Champion could benefit from ownership separate from the innerwear specialist, which built an empire on close-to-skin garments from Hanes, Bali, Playtex and Maidenform.
CEO Steve Bratspies said Hanesbrands is working to “drive accelerated growth and profitability” while streamlining the business and priming the company for “long-term success.”
News of a potential Champion sale comes as Hanesbrands closes its lone remaining U.S. cut-and-sew facility this month. It ran into trouble last year when it wound up with too much inventory like much of the apparel industry. Many retail partners cut innerwear replenishment orders this year, and Champion sales fell short of expectations, leaving the highly leveraged company in a financial pressure cooker.
Hanesbrands got started on cutting costs last month when it relocated of a few hundred U.S. jobs offshore after January layoffs. Two years ago, the company announced a plan to shore up finances and streamline its global supply chain.
Barington Capital chairman James Mitarotonda in August turned up the heat, telling Nelson to get Hanesbrands back to creating shareholder value.
“In order to reverse Hanesbrands’ rapidly declining share price, we believe the company must immediately focus on cash generation and debt reduction while also considering new management and directors to implement these performance enhancing initiatives,” Mitarotonda wrote in a letter to Nelson.
Hanesbrands fired back at Barington, stating that the board has the “right mix of expertise and diversity” and that the company’s Full Potential Plan will “unlock significant opportunities.”
The plan projected Champion becoming a $3 billion global brand by 2024, and outlined a goal to double the company’s market share with millennial and Gen Z consumers.
For the second quarter ended July 1, Hanesbrands reported innerwear sales rising 3 percent from a year earlier, while activewear fell 19 percent over the same period. Activewear sales have slowed industrywide after surging during the pandemic.
It hasn’t been all doom and gloom for Champion, however. Earlier this month, Hanesbrands struck an agreement with G-III Apparel Group to design, produce and distribute Champion and its value-oriented sibling, C9 Champion, in North America.
“G-III’s proven track record in category expansion and their best-in-class global infrastructure will enable us to reach a wider consumer base who already are, or will soon become, loyal to the Champion brand for generations,” said Vanessa LeFebvre, president, global activewear for Hanesbrands, in a statement dated Sept. 7.
She continued, “This partnership creates a significant opportunity to leverage G-III’s expertise in the outerwear category and their diversified distribution network, which will enable us to extend our offerings and support the brand’s lifestyle proposition.”
Additional reporting by Jessica Binns.
