HanesBrands reports strong Q4 growth, expects Q1 sales to improve by 14 percent

HanesBrands Inc. net sales for the fourth quarter ended January 2, 2021, were 1.8 billion dollars, compared with 1.75 billion dollars for the comparable period last year. The company recorded 28 million in revenue from personal protective garments (PPE) globally in the fourth quarter. Excluding net sales of 88 million dollars from the exited C9 Champion mass program and DKNY intimate apparel license and the effect of changes in foreign exchange rates, total constant-currency fourth-quarter net sales increased 6 percent.

For the full year, net sales were 6.7 billion dollars, including net sales of 959 million dollars of PPE, compared to 6.97 billion dollars in the prior year, which included net sales of 419 million dollars from the C9 Champion mass program and DKNY intimate apparel license. Excluding the exited programs and the effect of changes in foreign exchange rates, total constant-currency net sales for full-year increased 2 percent over the prior year.

“We delivered solid sales growth in the fourth quarter, with continued revenue momentum in our largest businesses and strong market share performance in our Innerwear and activewear segments,” said HanesBrands Chief Executive Officer Steve Bratspies in a statement.

HanesBrands implements ‘Full Potential’ business plan

During the fourth quarter, the company said, it completed a comprehensive business assessment and began implementing its Full Potential plan. The Full Potential plan focuses the company on four pillars to drive growth and enhance long-term profitability including growing the Champion brand globally, driving growth in innerwear with brands and products that appeal to younger consumers, building e-commerce excellence across channels and streamlining global portfolio.

“We are implementing our Full Potential plan with the goal of creating a consumer-centric company that delivers long-term growth and higher profitability,” added Bratspies.

As part of the implementation of its Full Potential plan, the company determined that it no longer views PPE as a long-term growth opportunity. In addition, as the result of a comprehensive strategic inventory review, the company is reducing its SKUs by 20 percent to enable greater focus on its highest-volume, fastest-growing, and most profitable products. As a result of these decisions, during the fourth quarter the company recorded 611 million dollars in inventory charges consisting of a 400 million dollars write-off of its entire PPE inventory-related balance and an inventory valuation write-down of approximately 211 million dollars related to the company’s SKU reduction program.

In addition, the company announced plans to explore strategic alternatives for its European innerwear business in order to further simplify its operations and focus resources on its strategic growth opportunities.

Fourth-quarter GAAP operating loss totalled 444 million dollars, while adjusted operating profit of 217 million dollars decreased 10 percent compared with the comparable period. Fourth-quarter GAAP net loss totalled 332 million dollars or 95 cents per share, compared to net income of 185 million dollars or 51 cents per diluted share in the prior year period. Adjusted net income totalled 135 million dollars or 38 cents per diluted share.

HanesBrands’ financial performance across categories

The company added that U.S. innerwear sales, excluding PPE, increased 13 percent, driven by strong point-of-sale trends, space gains in kids’ underwear, continued inventory re-stocking by retailers and the contribution from a 53rd week. The company grew its market share in U.S. basics and intimates. Considering the exit of the C9 Champion mass program and the DKNY intimate apparel license, sales grew 20 percent overall and excluding PPE, sales were up 16 percent.

U.S. Activewear segment revenue increased 7 percent on a rebased basis, driven by growth in the online, wholesale and distributor channels and international revenue increased 2 percent. Excluding 6 million dollars in PPE sales, core international revenue increased 1 percent. Revenues in Australia were up 8 percent in the quarter, driven by growth in Bonds and Bras N Things. The company also saw growth in Canada and Latin America, while Covid-related disruptions continued to create challenges in Asia and Europe. On a constant currency basis, international sales declined approximately 3 percent.

The company’s board of directors declared a regular quarterly cash dividend of 15 cents per share to be paid on March 9, 2021, to stockholders of record at the close of business on February 19, 2021.

HanesBrands expects Q1 sales to improve by 14 percent

The company expects first-quarter 2021 net sales to total approximately 1.485 billion dollars to 1.515 billion dollars. The midpoint of guidance represents net sales growth of 14 percent and includes a projected benefit of 50 million dollars from changes in foreign currency exchange rates and implies growth of 10 percent in constant currency.

The company expects first-quarter GAAP operating profit to range from 140 million dollars to 150 million dollars, while adjusted operating profit is expected to range from 150 million dollars to 160 million dollars. The midpoint of adjusted operating profit suggests an operating margin of 10.3 percent, compared with adjusted operating margin of 4.8 percent in the first quarter of 2020. GAAP and adjusted earnings per share are expected to range from 24 cents to 27 cents.

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