HanesBrands Recovery Fails to Impress Wall Street

HanesBrands Inc. showed strength in intimates and personal protective equipment last quarter, but still failed to impress investors. 

The Winston-Salem, N.C.-based innerwear and activewear company — parent to brands such as Hanes, Bali, Playtex, Maidenform, L’eggs and Wonderbra, among others — reported quarterly earnings Thursday before the market opened, falling short on both the top and bottom lines. The company’s stock fell more than 20 percent at the start of Thursday’s trading session as a result. 

Yet Stephen B. Bratspies, who took over as chief executive officer of HanesBrands in August, said he was pleased with the third-quarter results. 

“We saw significant improvements across our business and exceeded our expectations for sales, profits and cash flow from operations,” Bratspies said in a statement. “We saw particularly strong performance in our U.S. innerwear and global Champion businesses and I’m encouraged by our momentum even as we continue to operate in a challenging environment.”

For the three-month period ending Sept. 26, revenues were $1.8 billion, just below last year’s $1.86 billion, while profits were $103 million, down from $185 million the same time last year. 

Some of the worst-performing segments were HanesBrands’ international business, which declined 5 percent, and the activewear business, where sales fell 41 percent during the quarter on a year-over-year basis, mainly due to canceled sporting events and college bookstore closures.

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Even the Champion brand, once one of the company’s crown jewels, declined 27 percent during the quarter, compared to the same time last year. (Although Champion sales were up compared with the prior quarter.) HanesBrands also exited its C9 Champion program with Target earlier this year, a move that further cut into revenues. 

The company is expecting further headwinds in the current quarter, including higher selling, general and administrative expenses, as well as manufacturing and supply chain issues that could put pressure on margins. In addition, HanesBrands is expecting current quarter net sales to be down, to between $1.6 billion and $1.66 billion. 

Some bright spots during the quarter included the company’s digital business, which grew nearly 70 percent on a rebased basis through the company e-commerce web sites, retailer web sites, large internet pure-plays and business-to-business customers. In addition, U.S. innerwear sales increased 8.4 percent during the quarter and the company sold $179 million in personal protective garments globally. 

Still, some analysts worry that the company’s extensive store fleet (nearly 1,000 stores around the world) and dependency on wholesale channels, combined with its limited digital exposure, will have a lasting impact. 

“[HanesBrands] lacks a strong U.S. direct-to-consumer channel necessary to engage consumers as they migrate away from traditional brick-and-mortar retail,” Jay Sole, equity analyst at UBS, wrote in a note.  

The company ended the quarter with $731 million in cash and equivalents and $3.9 billion in long-term debt. 

In October, HanesBrands revealed its 2030 sustainability targets, which outlined not only sustainability goals over the next 10 years, but diversity efforts as well. 

The company’s stock, which closed down 2.68 percent at $16.37 on Wednesday evening, is up about 3 percent year-over-year. 

“Hanesbrands has iconic brands, a strong balance sheet, global reach, a deep commitment to sustainability and a passionate team,” Bratspies said. “We have tremendous opportunities ahead of us, and we are committed to delivering long-term growth. We are conducting an in-depth review of our business as we build our growth strategy. Parts of our strategy will begin to unfold in the fourth quarter and I look forward to reporting on our progress in the months ahead.”

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