Dive Brief:
- HanesBrands reported third quarter earnings of $937 million, a 2.5% decrease year over year, according to a press release Thursday.
- The company’s net sales in the U.S. fell 1%, but it said it was reaping the benefits of a“strategy of consumer-centricity” with younger customers, particularly through brand investments and innovation in Hanes, Maidenform and Bali. International net sales grew 1%.
- Shares of HanesBrands grew about 15% in intraday trading on Nov. 7 following the results, after its Q3 profitability exceeded analyst expectations, according to Morningstar Research Services.
Dive Insight:
HanesBrands closed the sale of the Champion brand in Q3. In the months since it announced its intent to sell the activewear brand to Authentic Brands Group, HanesBrands has pivoted its strategy to become a “simpler, more focused business” with more emphasis on its innerwear segment.
“Hanes’ results provide evidence that its sale of Champion (closed just after the end of the quarter) and greater focus on optimizing its core innerwear will bring about the long-term sales growth and margin improvement that we have anticipated,” David Swartz, senior equity analyst for Morningstar Research Services, said in an analyst note.
In Thursday’s release, HanesBrands stated it was on track to pay down $1 billion of debt in the second half of 2024, using the proceeds from the Champion sale. As of October, it had paid down $870 million.
The results exceeded the company’s previous expectations, and it adjusted its full-year outlook for operating profit and cash flow, with estimates of $174 million and $250 million, respectively.
Steve Bratspies, HanesBrands CEO, said in the release that the company reduced its leverage and expects to return to revenue growth in Q4.
“Our strategic actions to create a more focused, simplified business are working,” Bratspies said. “We are driving a step-function change in our cost structure, increasing operational efficiencies, reducing inventory, and freeing up capital to invest in growth. We expect the benefits of these actions to ramp over the next several quarters, giving us visibility and confidence to deliver continued margin improvement, cash generation, and debt reduction through 2025.”
