HanesBrands Inc. net sales decreased 7 percent to 1.67 billion dollars and on a constant currency basis, net sales decreased 3 percent or 60 million dollars.
The company said that the sales decline includes a 59 million dollars unfavourable impact from foreign exchange rates, compared to last year.
The constant currency decline was due to the 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 and the other Americas as well as Champion growth in Europe.
“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,” said Steve Bratspies, CEO of HanesBrands.
Review of HanesBrands Q3 financial results
Global Champion brand sales decreased 14 percent, with similar declines in both the U.S. and internationally. In constant currency, global brand sales decreased 9 percent. As compared to prior year, constant currency sales increased in Europe and the U.S. collegiate channels. However, this growth was more than offset by soft consumer demand in the U.S., order cancellations in the U.S. from late shipments and lingering Covid challenges in certain Asian markets.
Gross profit of 563 million dollars declined 20 percent and gross margin was 33.7 percent, down from 39.1 percent in the prior year. Adjusted gross profit was 576 million dollars, while adjusted gross margin of 34.5 percent declined approximately 460 basis points compared to prior year.
Operating profit and operating margin in the quarter were 141 million dollars and 8.5 percent, respectively, compared to 235 million and 13.1 percent, respectively, in the prior year. Adjusted operating profit of 168 million dollars declined 96 million dollars as compared to third-quarter 2021 and adjusted operating margin of 10 percent declined nearly 470 basis points.
Q3 business summary of HanesBrands segments
The company’s innerwear sales decreased 11 percent driven by macroeconomic pressures that weighed on consumer spending as well as the impact from retailer actions to manage inventory.
Activewear sales were comparable to prior year. Relative to last year, the company experienced continued growth in the collegiate channel as well as solid growth in the printwear channel for both its Champion and Hanes brands. This growth was 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. By brand, Champion sales within the activewear reporting segment decreased 9 percent, while sales of other activewear brands within the activewear reporting segment increased 15 percent.
International sales decreased 6 percent on a reported basis, including the 59 million dollars from unfavourable 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.
HanesBrands announces Q4 and full-year financial outlook
For the fourth-quarter, the company currently expects net sales of approximately 1.40 billion dollars to 1.45 billion dollars, which includes a projected headwind of approximately 68 million dollars from changes in foreign currency exchange rates. At the midpoint, this represents an approximate 15 percent decline as compared to prior year on a constant currency basis and a 19 percent decline on a reported basis.
GAAP operating profit is expected to range from approximately 53 million dollars to 83 million dollars and adjusted operating profit to range from approximately 70 million dollars to 100 million dollars.
GAAP earnings per share are expected to range from approximately 0 to 7 cents and adjusted earnings per share from approximately 4 cents to 11 cents.
For fiscal 2022, the company currently expects net sales of 6.16 billion dollars to 6.21 billion dollars, which includes a projected headwind of approximately 196 million dollars from changes in foreign currency exchange rates. At the midpoint, this represents an approximate 6 percent decline as compared to prior year on a constant currency basis and a 9 percent decline on a reported basis.
GAAP operating profit is expected to range from approximately 512 million dollars to 542 million dollars and adjusted operating profit to range from approximately 567 million dollars to 597 million dollars, which includes a projected headwind of approximately 26 million dollars from changes in foreign currency exchange rates.
GAAP earnings per share are expected to range from approximately 82 cents to 89 cents and adjusted earnings per share to range from approximately 95 cents to 1.02 dollars.