HanesBrands Ransomware Attack Produces $20.5 Million Insurance Payout
After a 2022 ransomware attack that cost HanesBrands Inc. around $100 million in global sales, the company has recouped a bit of that loss in the form of a $20.5 million insurance payment.
The Winston-Salem, N.C.-based apparel company disclosed the insurance compensation in its third-quarter regulatory filing with the United States Securities and Exchange Commission (SEC). The payment serves as compensation for lost profits following the ransomware attack.
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In May 2022, HanesBrands reported in a regulatory filing that it had experienced a ransomware attack that month. The attack impacted the company’s global supply chain and impeded its ability to fulfill customer orders for around three weeks. As a result, HanesBrands saw a $35 million drop in adjusted operating profit during the second quarter of fiscal 2022, and its adjusted earnings per share decreased by 8 cents.
In this most recent filing, HanesBrands said it received a business interruption insurance benefit of $17.8 million, with $15 million of those funds coming in during the third quarter. And over the past nine months, the company has recognized a benefit of $24.1 million, with $20.6 million received, so far. HanesBrands also recognized a benefit of $708,000 as a reimbursement of its legal fees related to the attack.
While HanesBrands said in the filing that it took measures to safeguard the integrity of its information technology systems, current and former employees led by Nicole Toussaint filed a class-action lawsuit against the company in October 2022. Toussaint, who worked for HanesBrands as an assistant manager from 2012 through 2018, alleged she was not informed of the breach until months after it occurred. The suit alleged plaintiffs’ personal information, including financial account numbers, health records, birth date and other data, were compromised as a result of the cyberattack.
HanesBrands said it paid an undisclosed amount to the ransomware attacker and received confirmation in June 2022 that the stolen information had been deleted.
In its SEC filing, HanesBrands said it is “vigorously defending the pending matter and believes the case is without merit,” and said it does not expect the suit to have a negative effect on the company’s financial standing.
HanesBrands has struggled recently. Saddled with $3.6 billion in debt, the company has floated the idea of selling its Champion brand after activist investor Barington Capital urged the manufacturer to trim its financial obligations. And after reporting a 16.8 percent dip in sales to $383.6 million this quarter, HanesBrands received an additional blow as competitor Gildan reported flat sales numbers at $744 million.
In late October, the company opted not to renew its contract with National Distribution Center, which operated within the HanesBrands distribution center in High Point, N.C. As a result, National Distribution Center will lay off 217 employees working at the facility. The center handled Champion products. HanesBrands also closed its last U.S. cut-and-sew facility during the third quarter.
