For the year, Hanesbrands expects net sales of around $6.16 billion to $6.21 billion, an estimated 6 percent decline from 2021.
In a Nutshell: Hanesbrands Inc., in announcing third-quarter results, said it now expects net sales in the fourth quarter of approximately $1.40 billion to $1.45 billion—a 15 percent decline compared to the prior year.
Operating profit is expected to range from about $53 million to $83 million. Earnings per share (EPS) are forecast to be come in at zero to 7 cents.
For the year, Hanesbrands said it expects net sales of around $6.16 billion to $6.21 billion, representing an estimated 6 percent decline compared to the prior year. Operating profit is projected to be $512 million to $542 million, while EPS is seen ranging from 82 cents to 89 cents.
Capital investments of approximately $140 million, consisting of about $90 million of capital expenditures and $50 million of cloud computing assets are projected.
The company said new products and innovations continue to roll out to younger consumers. In addition to the successful launches of Hanes Total Support Pouch with X-Temp and Hanes Retro Rib, it plans to move forward with its marketing plan to get younger in innerwear with the rollout of new products.
Beginning in the fourth quarter, the Hanes Originals product line will be available in certain retail channels followed by expanded distribution in early 2023. Hanes Originals consists of enhanced core men’s and women’s innerwear products, with a fit and style aimed at younger consumers. In its Maidenform brand portfolio, the company launched a seamless collection of bras and underwear delivering stretch-to-fit comfort, as well as a lace-based shapewear short that combines shaping with style. These Maidenform products, aimed at younger consumers, quickly became top sellers on maidenform.com with expanded distribution for bras beginning in 2023.
In addition, Hanesbrands said its “Full Potential” global supply chain initiatives continues to drive simplification, increase speed and flexibility, expand margins and improve cash flow generation. As part of the plan, the company did an in-depth analysis of its entire global network to best position its global supply chain to match revenue growth opportunities.
Within its distribution network, the company is consolidating to fewer, bigger distribution centers in the U.S., increasing the use of direct-ship to its large retail partners, using dedicated facilities as well as increased automation. Within its existing large sourcing operations, the company is taking actions to further reduce cost and improve speed. At the same time, it’s building sourcing capabilities in areas such as synthetic fabrics and short-term fashion offerings to capture incremental growth opportunities.
Selling, general and administrative (SG&A) expenses declined 9 percent to $421 million compared to last year. Total liquidity at the end of quarter was $863 million, consisting of $253 million of cash and equivalents and $610 million of available capacity under its credit facilities.
Inventory at the end of the quarter was $2.14 billion, an increase of 31 percent over the prior-year period. The increase was driven mainly by a combination of higher units and higher inflation on input and transportation costs.
Sales: Net sales for the third quarter ended Oct. 1 decreased 7 percent to $1.67 billion, which includes a $59 million unfavorable impact from foreign exchange rates, compared to last year.
The decline was attributed to a macro-driven slowdown in consumer spending in the U.S. and certain Asian markets, coupled with the impact to orders as U.S. retailers tightly manage their overall inventory levels. These headwinds more than offset innerwear growth in Australia, as well as Champion growth in Europe.
Global Champion brand sales fell 14 percent compared to prior year, with similar declines in the U.S. and internationally. Innerwear sales decreased 11 percent year over year, driven down by macroeconomic pressures that weighed on consumer spending, as well as the impact from retailer actions to manage inventory.
Hanesbrands said while its inventory at retail was below the prior year, retailer actions to tightly manage overall inventory levels negatively impacted near-term replenishment orders and delayed the timing of certain events. These pressures more than offset the benefits from the first-quarter price increase and retail space gains.
Activewear sales were comparable to prior year, with growth in the collegiate channel and the printwear channel for Champion and Hanes brands. This growth was essentially offset by declines in its other channels due to lower point-of-sale trends and higher activewear inventory levels at retail that drove order cancellations, particularly within Champion.
International sales decreased 6 percent, including $59 million from unfavorable foreign exchange rates. International sales increased 5 percent on a constant currency basis compared to prior year, driven by Champion growth in Europe, as well as innerwear growth in Australia and the “Other Americas.” This growth more than offset Champion declines in certain Asian markets.
Earnings: Income declined to $80 million, or 23 cents per diluted share, from income of $177 million, or 50 cents per diluted share, last year.
Gross profit declined 20 percent to $563 million. Gross margin was 33.7 percent, down from 39.1 percent in the prior year.
Near-term headwinds, including commodity and ocean freight inflation, as well as manufacturing time-out costs related to its inventory reduction actions represented more than 500 basis points of year-over-year margin headwinds in the quarter. These were partially offset by pricing actions, decreased use of air freight, and cost savings initiatives.
CEO’s Take: Steve Bratspies, CEO, said: “Our global team’s agility and focus helped us deliver operating profit and earnings per share in line with expectations, despite the tougher-than-expected sales environment. Our business fundamentals, brands and categories remain strong, and we are focused on controlling those things that are in our control.”
“We’re making progress in reducing SKUs and inventory, while optimizing our global supply chain,” Bratspies added. “We’re launching products aimed at younger consumers. We’re taking aggressive actions to manage through the near-term challenges as we execute the Full Potential strategy, which will put us in an advantaged position when the macroenvironment stabilizes.”