- Net sales were $1.16 billion, the midpoint of the Company’s
expected range.
- GAAP and Adjusted gross margin of 39.9% increased 750 and 720
basis points, respectively, compared to prior year, ahead of
expectations.
- GAAP operating profit was $52 million. Adjusted operating
profit of $84 million exceeded the high-end of the Company’s
expectations.
- Reduced inventory 28% year-over-year. Generated cash flow from
operations of $26 million.
- Further reduced leverage to 5.0 times net debt-to-adjusted
EBITDA, 0.4 times lower than prior year and 0.2 times lower than
year-end 2023. Ended quarter with over $1.2 billion of
liquidity.
- Provides second-quarter 2024 guidance, including net sales of
$1.335 billion to $1.375 billion; GAAP operating profit of $96
million to $111 million; Adjusted operating profit of $115 million
to $130 million; GAAP EPS of $0.02 to $0.06; and, Adjusted EPS of
$0.07 to $0.11.
- Reiterates full-year 2024 guidance, with continued visibility
for strong profit and EPS growth despite a continued cautious view
of consumer demand. Company continues to expect to pay down more
than $300 million of debt in 2024.
HanesBrands Inc. (NYSE: HBI), a global leader in iconic apparel
brands, today announced results for the first-quarter 2024.
“We delivered solid first quarter results with sales at the
midpoint of our outlook, better-than-expected adjusted operating
profit, positive cash flow generation and further reduction of our
leverage. With the year unfolding as anticipated and our profit
visibility, we reiterated our outlook for the full-year,” said
Steve Bratspies, CEO. “Over the past three years, we’ve taken
necessary actions across the business to enhance and strengthen
both the operating and financial models of the Company. With our
leading brand positions, lower fixed-cost structure, reestablished
gross margin, consistent cash generation and a commitment to reduce
debt, we have created a multi-year flywheel designed to accelerate
earnings, deleverage faster, and invest in growth initiatives,
which we believe will drive strong shareholder returns over the
next several years.”
Highlights
- Strong gross margin performance continued, operating margin
improvement on-track. Gross margin recovery to pre-inflation
levels continued in the first-quarter driven by lower input costs
as commodity and ocean freight inflation moderated, the benefits
from cost savings initiatives, and the impact from business mix.
The strong gross margin performance coupled with cost savings
initiatives and disciplined expense management drove a
year-over-year increase in GAAP and Adjusted operating margins of
approximately 40 basis points and approximately 270 basis points,
respectively. Looking forward, given the visibility to input costs
and cost savings benefits on its balance sheet, the Company expects
continued year-over-year improvement in both gross and operating
margins each quarter in 2024.
- Continued to reduce inventory, drive operating cash flow and
strengthen the balance sheet. Through disciplined working
capital management, strong inventory management capabilities as
well as the benefit from lower input costs, the Company reduced
inventory 28% year-over-year. The Company generated $26 million of
operating cash flow in a period that historically uses cash. With
visibility to strong profit growth, the Company expects to generate
another year of strong operating cash flow and continue to pay down
debt.
- U.S. Innerwear gained an additional 50 basis points of
market share. Despite the expected market decline in the
quarter, the Company’s strategy of consumer-centricity is working
as it continued to gain market share and outperform the market. In
the quarter, its U.S. Innerwear business gained market share with
both Men and Women as well as with both younger and older
consumers. The market share gains were driven by a combination of
operating model enhancements, new product innovation and higher
levels of brand marketing investment. Sales from new product
innovation increased 19% over prior year. Brand marketing
investments more than doubled over prior year to support its
Maidenform M product line as well as the brand campaign behind its
recently launched Hanes SuperSoft product line, which began during
the NCAA basketball tournament.
First-Quarter 2024
Results
- Net Sales of $1.16 billion were at the midpoint of the
Company’s expected range. As compared to prior year, net sales
decreased approximately 17%, with approximately 120 basis points
due to the U.S. Sheer Hosiery divestiture and approximately 105
basis points due to the unfavorable impact from foreign exchange
rates. On an organic constant currency basis, net sales decreased
approximately 15% compared to last year. Both reported and organic
constant-currency sales reflect a headwind of more than 400 basis
points due to the expected discrete items impacting the Activewear
segment in the first quarter (see Business Segment Summary section
below).
- Global Champion brand sales were in line with the
Company’s expectation, including growth in Japan, China and Latin
America. As compared to prior year, global Champion brand sales
decreased 26% on a reported basis and 25% on a constant currency
basis, with approximately 500 basis points of the decrease due to
the planned strategic shift of its Champion kids’ business to a
license model at the beginning of 2024. U.S. sales decreased 35%,
with approximately 900 basis points of the decrease from the shift
of the kids' business to a license-model and the remainder driven
by the continued challenging activewear market dynamics as well as
the strategic actions taken to strengthen the brand, particularly
ahead of the new Fall-Winter 2024 product line. Internationally,
sales decreased 17% on a reported basis and 16% on a constant
currency basis. Constant currency sales increased in Japan, China
and Latin America, which were more than offset by decreases in
Europe and Australia as macroeconomic headwinds continued to impact
demand in these regions.
- Gross Profit and Adjusted Gross Profit, which
excludes certain costs related to the Company’s Full Potential
transformation plan and its global Champion performance plan, were
both $461 million, representing an increase of approximately 2%
over prior year. Gross Margin and Adjusted Gross Margin were
both 39.9%, representing a year-over-year increase of 750 basis
points and 720 basis points, respectively. Adjusted Gross Margin
was 140 basis points ahead of the Company’s outlook for the
quarter. The year-over-year improvement, which delivered gross
margin in line with historic levels, was driven primarily by lower
input costs as commodity and ocean freight inflation moderated, the
benefits of cost savings initiatives, and the impact from business
mix.
- Selling, General and Administrative (SG&A) Expenses
increased 4% to $409 million as compared to last year. Adjusted
SG&A Expenses, which exclude certain costs related to the
Company’s Full Potential transformation plan and its global
Champion performance plan, decreased 3%, or $13 million,
year-over-year to $378 million. The year-over-year decrease in
adjusted SG&A was driven by benefits from cost savings
initiatives, lower distribution expense, and disciplined expense
management, which more than offset planned increases in brand
marketing investments in both its U.S. Innerwear and global
Champion businesses. As a percent of net sales, adjusted SG&A
expense of 32.7% increased 450 basis points over prior year with
185 basis points due to increased brand marketing investments. The
remainder of the year-over-year increase was driven by deleverage
from lower sales volume, which was partially offset by the benefits
from cost savings initiatives.
- Operating Profit and Operating Margin in first-quarter
2024 were $52 million and 4.5%, respectively, which compared to $57
million and 4.1%, respectively, in the prior year. Adjusted
Operating Profit of $84 million increased 32% over prior year,
which was above the Company’s outlook. Adjusted Operating
Margin of 7.3% increased approximately 270 basis points over
first-quarter 2023.
- Interest Expense and Other Expenses for first-quarter
2024 were approximately $67 million and $9 million, respectively,
which compared to approximately $58 million and $15 million,
respectively, in the prior year. With debt lower by more than $500
million as compared to prior year, the increase in interest expense
was driven by higher average interest rates.
- Tax Expense for first-quarter 2024 was $15 million as
compared to $19 million in the prior period. Effective and
Adjusted Tax Rates for first-quarter 2024 were (64)% and 194%,
respectively. For first-quarter 2023, the effective tax rate and
the adjusted effective tax rate were (116)% and (689)%,
respectively. The Company's effective tax rate for 2024 and 2023 is
not reflective of the U.S. statutory rate due to valuation
allowances against certain net deferred tax assets.
- Net Loss totaled approximately $(39) million, or $(0.11)
per diluted share in first-quarter 2024. This compares to net loss
of $(34) million, or $(0.10) per diluted share, last year.
Adjusted Net Loss totaled $(7) million, or $(0.02) per
diluted share. This compares to adjusted net loss of $(21) million,
or $(0.06) per diluted share, in first-quarter 2023.
See the Note on Adjusted Measures and Reconciliation to GAAP
Measures later in this news release for additional discussion and
details of actions, which include Full Potential transformation
plan and global Champion performance plan charges.
First-Quarter 2024 Business Segment
Summary
- Innerwear sales decreased 8% as compared to prior year,
which was slightly below the Company’s expectations due to a
higher-than-anticipated level of inventory management actions by
select retailers. Despite the expected market decline in the
quarter, the Company’s strategy of consumer-centricity is working
as it continued to gain market share and outperform the market. In
the quarter, point-of-sale trends and market share gains were ahead
of its expectations. The Company gained another 50 basis points of
market share in the first quarter, with gains across both Men’s and
Women’s as well as both younger and older consumers.
Operating margin of 21.9% increased
approximately 880 basis points over prior year, with brand
marketing investments reaching nearly 5% of sales, its highest
level in more than a decade. The year-over-year margin improvement
was driven primarily by lower input costs as commodity and ocean
freight inflation moderated, and the benefits of cost savings
initiatives, which helped fund a 120% increase in brand marketing
investments to drive consumer demand behind its product innovation
launches and various new brand campaigns.
- Activewear sales decreased 31%, or $97 million, compared
to prior year, in line with the Company’s outlook. As expected,
approximately two-thirds, or $65 million, of the decrease was due
to three discrete items impacting year-over-year comparability in
the first quarter. These three items include: the strategic shift
of the Champion kids’ business to a license model beginning in
2024; an unseasonably strong collegiate sales performance in
first-quarter 2023; and, accelerated orders into first-quarter 2023
ahead of the Company’s SAP implementation. The remainder of the
year-over-year sales decrease was driven by the ongoing combination
of challenging activewear apparel market dynamics, including soft
consumer demand and cautious ordering from retailers, and the
near-term impact from the strategic actions taken to strengthen the
Champion brand, particularly ahead of the new Fall-Winter 2024
product line.
Operating margin for the segment of 0.5%
increased 440 basis points sequentially. Compared to the first
quarter of last year, segment operating margin decreased
approximately 265 basis points as the impact from lower sales
volume and increased brand marketing investments more than offset
the benefits from lower input costs, business mix and disciplined
SG&A expense management.
- International sales decreased 12% on a reported basis,
including $15 million from unfavorable foreign exchange rates.
International sales decreased 9% on a constant currency basis
compared to prior year, in line with the Company’s outlook. In
constant currency, growth in Latin America, Japan and China were
more than offset by decreases in Europe and Australia as
macroeconomic headwinds continue to impact demand in these
regions.
Operating margin for the segment of 12.3%
increased approximately 120 basis points compared to prior year as
the benefits from lower input costs and business mix more than
offset SG&A deleverage from lower sales and the negative impact
from foreign exchange rates.
Cash Flow, Balance Sheet and
Liquidity
- Total liquidity position at the end of first-quarter
2024 was more than $1.2 billion, consisting of $191 million of cash
and equivalents and more than $1 billion of available capacity
under the Company’s credit facilities.
- Based on the calculation as defined in the Company’s senior
secured credit facility, the Leverage Ratio at the end of
first-quarter 2024 was 5.0 times on a net debt-to-adjusted EBITDA
basis, which was below its first-quarter 2024 covenant of 6.75
times and below 5.4 times at the end of first-quarter 2023 (See
Table 6-B).
- Inventory at the end of first-quarter 2024 of $1.42
billion decreased 28%, or $550 million, year-over-year. The
year-over-year decrease was driven predominantly by the benefits of
its inventory management capabilities, including SKU discipline and
lifecycle management, as well as lower input costs as commodity and
ocean freight inflation moderated.
- Cash Flow from Operations was $26 million in
first-quarter 2024 as compared to $45 million last year. Free
Cash Flow was $6 million in first-quarter 2024 as compared to
$20 million in first-quarter 2023.
Second-Quarter and Full-Year 2024
Financial Outlook
The Company is providing guidance on tax expense due to the
expected fluctuation of its quarterly tax rate, stemming from the
deferred tax reserve matter previously disclosed in the fourth
quarter of 2022. Importantly, the reserve does not impact cash
taxes. Some portion of the reserve may reverse in future
periods.
The Company closed the sale of its U.S. Sheer Hosiery business
on September 29, 2023. For the full year 2023, its U.S. Sheer
Hosiery business generated $50 million of net sales and an
operating loss of $(2) million. For second-quarter 2023, its U.S.
Sheer Hosiery business generated approximately $13.5 million of net
sales and an operating loss of approximately $(1.5) million.
For fiscal year 2024, which ends on December 28, 2024, the
Company currently expects:
- Net sales of approximately $5.35 billion to $5.47 billion,
which includes projected headwinds of approximately $50 million
from the U.S. Sheer Hosiery divestiture and approximately $45
million from changes in foreign currency exchange rates. At the
midpoint, this represents an approximate 4% decrease as compared to
prior year on a reported basis and an approximate 2% decrease on an
organic constant currency basis.
- GAAP operating profit of approximately $430 million to $450
million.
- Adjusted operating profit of approximately $500 million to $520
million, which includes a projected headwind of approximately $9
million from changes in foreign currency exchange rates.
- Pretax charges for actions related to the Full Potential
transformation plan and the global Champion performance plan of
approximately $70 million.
- GAAP and Adjusted Interest expense of approximately $260
million.
- GAAP and Adjusted Other expenses of approximately $36
million.
- GAAP and Adjusted Tax expense of approximately $55
million.
- GAAP earnings per share of approximately $0.22 to $0.28.
- Adjusted earnings per share of approximately $0.42 to
$0.48.
- Cash flow from operations of approximately $400 million.
- Capital investments of approximately $75 million, consisting of
approximately $65 million of capital expenditures and approximately
$10 million of cloud computing arrangements. Per GAAP, capital
expenditures are reflected in cash from investing activities and
certain cloud computing arrangements are reflected in Other Assets
within cash flow from operating activities. The approximate $10
million of cloud computing arrangements is factored into the full
year cash flow from operations guidance of approximately $400
million.
- Free cash flow of approximately $335 million.
- Fully diluted shares outstanding of approximately 354
million.
For second-quarter 2024, which ends on June 29, 2024, the
Company currently expects:
- Net sales of approximately $1.335 billion to $1.375 billion,
which includes projected headwinds of approximately $13.5 million
from the U.S. Sheer Hosiery divestiture and approximately $25
million from changes in foreign currency exchange rates. At the
midpoint, this represents an approximate 6% decrease as compared to
prior year on a reported basis and an approximate 3% decrease on an
organic constant currency basis.
- GAAP operating profit of approximately $96 million to $111
million.
- Adjusted operating profit of approximately $115 million to $130
million, which includes a projected headwind of approximately $3
million from changes in foreign currency exchange rates.
- Pretax charges for actions related to the Full Potential
transformation plan and the global Champion performance plan of
approximately $19 million.
- GAAP and Adjusted Interest expense of approximately $67
million.
- GAAP and Adjusted Other expenses of approximately $9
million.
- GAAP and Adjusted Tax expense of approximately $14
million.
- GAAP earnings per share of approximately $0.02 to $0.06.
- Adjusted earnings per share of approximately $0.07 to
$0.11.
- Fully diluted shares outstanding of approximately 353
million.
HanesBrands has updated its quarterly frequently-asked-questions
document, which is available at www.Hanes.com/FAQ.
Note on Adjusted Measures and
Reconciliation to GAAP Measures
To supplement financial results prepared in accordance with
generally accepted accounting principles, the Company provides
quarterly and full-year results concerning certain non‐GAAP
financial measures, including adjusted EPS, adjusted income (loss),
adjusted income tax expense, adjusted income (loss) before income
tax expense, adjusted operating profit (and margin), adjusted
SG&A, adjusted gross profit (and margin), EBITDA, adjusted
EBITDA, adjusted effective tax rate, adjusted interest expense and
adjusted other expenses, net debt, leverage ratio and free cash
flow.
Adjusted EPS is defined as diluted EPS excluding actions and the
tax effect on actions. Adjusted income (loss) is defined as income
(loss) excluding actions and the tax effect on actions. Adjusted
income tax expense is defined as income tax expense excluding
actions. Adjusted income (loss) before income tax is defined as
income (loss) before income tax excluding actions. Adjusted
operating profit is defined as operating profit excluding actions.
Adjusted SG&A is defined as selling, general and administrative
expenses excluding actions. Adjusted gross profit is defined as
gross profit excluding actions. Adjusted interest is defined as
interest expense excluding actions. Adjusted other expenses is
defined as other expenses excluding actions and adjusted effective
tax rate is defined as adjusted income tax expense divided by
adjusted income (loss) before income tax.
Charges for actions taken in 2024 and 2023, as applicable,
include the global Champion performance plan, supply chain
segmentation, headcount actions and related severance charges,
technology charges, gain/loss on classification of assets held for
sale, professional services, loss on extinguishment of debt, gain
on final settlement of cross currency swap contracts and the tax
effects thereof. The global Champion performance plan includes
actions and related charges regarding the Company’s accelerated and
enhanced strategic initiatives to further streamline the operations
and position the brand for long term profitable growth and the
evaluation of strategic alternatives for the global Champion
business.
While these costs are not expected to continue for any singular
transaction on an ongoing basis, similar types of costs, expenses
and charges have occurred in prior periods and may recur in future
periods depending upon future business plans and circumstances.
HanesBrands has chosen to present these non‐GAAP measures to
investors to enable additional analyses of past, present and future
operating performance and as a supplemental means of evaluating
operations absent the effect of the Full Potential transformation
plan, the global Champion performance plan and other actions that
are deemed to be material stand-alone initiatives apart from the
Company’s core operations. HanesBrands believes these non-GAAP
measures provide management and investors with valuable
supplemental information for analyzing the operating performance of
the Company’s ongoing business during each period presented without
giving effect to costs associated with the execution of any of the
aforementioned actions taken.
The Company has also chosen to present EBITDA and adjusted
EBITDA to investors because it considers these measures to be an
important supplemental means of evaluating operating performance.
EBITDA is defined as net income (loss) before the impacts of
discontinued operations, interest, taxes, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA excluding (x)
restructuring charges related to the Full Potential transformation
plan, the global Champion performance plan, and other
action-related charges described in more detail in Table 6-A and
(y) certain other losses, charges and expenses as defined in the
Consolidated Net Total Leverage Ratio under its Fifth Amended and
Restated Credit Agreement, dated November 19, 2021, as amended (the
“Credit Agreement”) described in more detail in Table 6-B.
HanesBrands believes that EBITDA and adjusted EBITDA are frequently
used by securities analysts, investors and other interested parties
in the evaluation of companies in the industry, and management uses
EBITDA and adjusted EBITDA for planning purposes in connection with
setting its capital allocation strategy. EBITDA and adjusted EBITDA
should not, however, be considered as measures of discretionary
cash available to invest in the growth of the business.
Net debt is defined as the total of current debt, long-term
debt, and borrowings under the accounts receivable securitization
facility (excluding long-term debt issuance costs and debt discount
and borrowings of unrestricted subsidiaries under the accounts
receivable securitization facility) less (x) other debt and cash
adjustments and (y) cash and cash equivalents. Leverage ratio is
the ratio of net debt to adjusted EBITDA as it is defined in our
Credit Agreement.
The Company defines free cash flow as net cash from operating
activities less capital expenditures. Management believes that free
cash flow, which measures our ability to generate additional cash
from our business operations, is an important financial measure for
use in evaluating the Company's financial performance. The Company
defines organic net sales as net sales excluding those derived from
businesses acquired or divested within the previous 12 months of
the reporting date.
HanesBrands is a global company that reports financial
information in U.S. dollars in accordance with GAAP. As a
supplement to the Company’s reported operating results, HanesBrands
also presents constant-currency financial information, which is a
non-GAAP financial measure that excludes the impact of translating
foreign currencies into U.S. dollars. The Company uses constant
currency information to provide a framework to assess how the
business performed excluding the effects of changes in the rates
used to calculate foreign currency translation.
To calculate foreign currency translation on a constant currency
basis, operating results for the current-year period for entities
reporting in currencies other than the U.S. dollar are translated
into U.S. dollars at the average exchange rates in effect during
the comparable period of the prior year (rather than the actual
exchange rates in effect during the current year period).
HanesBrands believes constant currency information is useful to
management and investors to facilitate comparison of operating
results and better identify trends in the Company’s businesses. The
Company defines organic constant currency sales as net sales
excluding those derived from businesses acquired or divested within
the previous 12 months of the reporting date and also excluding the
impact of translating foreign currencies into U.S. dollars as
discussed above.
Non‐GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as an alternative to,
or substitute for, financial results prepared in accordance with
GAAP. Further, the non-GAAP measures presented may be different
from non-GAAP measures with similar or identical names presented by
other companies.
Reconciliations of these non-GAAP measures to the most directly
comparable GAAP financial measures are presented in the
supplemental financial information included with this news
release.
Cautionary Statement Concerning Forward-Looking
Statements
This news release contains certain information that may
constitute forward-looking statements, as defined under U.S.
federal securities laws. Forward-looking statements include all
statements that do not relate solely to historical or current
facts, and can generally be identified by the use of words such as
“may,” believe,” “could,” “will,” “expect,” “outlook,” “potential,”
“project,” “estimate,” “future,” “intend,” “anticipate,” “plan,”
“continue” or similar expressions. However, the absence of these
words or similar expressions does not mean that a statement is not
forward-looking. All statements with respect to our intent, belief
and current expectations about our strategic direction, prospects
and future results are forward-looking statements and are subject
to risks and uncertainties that could cause actual results to
differ materially from those implied or expressed by such
statements. These risks and uncertainties include, but are not
limited to, such things as trends associated with our business, our
ability to implement successfully, or at all, our Full Potential
transformation plan and our global Champion performance plan; our
ability to identify, execute, and realize benefits, successfully,
or at all, from, any potential strategic transaction involving
Champion; the rapidly changing retail environment and the level of
consumer demand; the effects of any geopolitical conflicts
(including the ongoing Russia-Ukraine conflict and Middle East
conflicts) or public health emergencies or severe global health
crises, including effects on consumer spending, global supply
chains, critical supply routes and the financial markets; our
ability to deleverage on the anticipated time frame or at all,
which could negatively impact our ability to satisfy the financial
covenants in our Credit Agreement or other contractual
arrangements; any inadequacy, interruption, integration failure or
security failure with respect to our information technology; future
intangible assets or goodwill impairment due to changes in our
business, market conditions, or other factors, including any sale
of the Champion business; significant fluctuations in foreign
exchange rates; legal, regulatory, political and economic risks
related to our international operations; our ability to effectively
manage our complex international tax structure; our future
financial performance; and other risks identified from time to time
in our most recent Securities and Exchange Commission reports,
including our annual report on Form 10-K and quarterly reports on
Form 10-Q. Since it is not possible to predict or identify all of
the risks, uncertainties and other factors that may affect future
results, the above list should not be considered a complete list.
Any forward-looking statement speaks only as of the date on which
such statement is made, and HanesBrands undertakes no obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise, other than as
required by law.
About HanesBrands
HanesBrands (NYSE: HBI) makes everyday apparel that is known and
loved by consumers around the world for comfort, quality and value.
Among the Company’s iconic brands are Hanes, the leading basic
apparel brand in the United States; Champion, an innovator at the
intersection of lifestyle and athletic apparel; Bonds, which is
setting new standards for design and sustainability; Maidenform,
America’s number one shapewear brand; and Bali, America’s number
one national bra brand. HBI employs 48,000 associates in
approximately 30 countries and has built a strong reputation for
workplace quality and ethical business practices. The Company, a
longtime leader in sustainability, has set aggressive 2030 goals to
improve the lives of people, protect the planet and produce
sustainable products. HBI is building on its unmatched strengths to
unlock its Full Potential and deliver long-term growth that
benefits all of its stakeholders.
TABLE 1
HANESBRANDS INC.
Condensed Consolidated
Statements of Operations
(in thousands, except per
share data)
(Unaudited)
Quarters Ended
March 30, 2024
April 1, 2023
% Change
Net sales
$
1,156,201
$
1,389,410
(16.8
)%
Cost of sales
695,274
939,717
Gross profit
460,927
449,693
2.5
%
As a % of net sales
39.9
%
32.4
%
Selling, general and administrative
expenses
408,821
392,374
4.2
%
As a % of net sales
35.4
%
28.2
%
Operating profit
52,106
57,319
(9.1
)%
As a % of net sales
4.5
%
4.1
%
Other expenses
9,271
14,771
Interest expense, net
66,689
58,452
Loss before income taxes
(23,854
)
(15,904
)
Income tax expense
15,268
18,500
Net loss
$
(39,122
)
$
(34,404
)
Loss per share:
Basic
$
(0.11
)
$
(0.10
)
Diluted
$
(0.11
)
$
(0.10
)
Weighted average shares outstanding:
Basic
351,576
350,435
Diluted
351,576
350,435
TABLE 2-A
HANESBRANDS INC.
Supplemental Financial
Information
Impact of Foreign
Currency
(in thousands, except per
share data)
(Unaudited)
The following table presents a
reconciliation of reported results on a constant currency basis for
the quarter ended March 30, 2024 and a comparison to prior
year:
Quarter Ended March 30,
2024
As Reported
Impact from Foreign
Currency1
Constant Currency
Quarter Ended April 1,
2023
% Change, As
Reported
% Change, Constant
Currency
As reported under GAAP:
Net sales
$
1,156,201
$
(14,560
)
$
1,170,761
$
1,389,410
(16.8
)%
(15.7
)%
Gross profit
460,927
(10,135
)
471,062
449,693
2.5
4.8
Operating profit
52,106
(4,106
)
56,212
57,319
(9.1
)
(1.9
)
Diluted loss per share3
$
(0.11
)
$
(0.01
)
$
(0.10
)
$
(0.10
)
10.0
%
—
%
As adjusted:2
Net sales
$
1,156,201
$
(14,560
)
$
1,170,761
$
1,389,410
(16.8
)%
(15.7
)%
Gross profit
461,433
(10,135
)
471,568
454,216
1.6
3.8
Operating profit
83,827
(4,106
)
87,933
63,440
32.1
38.6
Diluted loss per share3
$
(0.02
)
$
(0.01
)
$
(0.01
)
$
(0.06
)
(66.7
)%
(83.3
)%
1
Effect of the change in foreign currency
exchange rates year-over-year. Calculated by applying prior period
exchange rates to the current year financial results.
2
Results for the quarters ended March 30,
2024 and April 1, 2023 reflect adjustments for restructuring and
other action-related charges. See "Reconciliation of Select GAAP
Measures to Non-GAAP Measures" in Table 6-A.
3
Amounts may not be additive due to
rounding.
TABLE 2-B
HANESBRANDS INC.
Supplemental Financial
Information
Organic Constant
Currency
(in thousands, except per
share data)
(Unaudited)
The following table presents a
reconciliation of reported results on an organic constant currency
basis for the quarter ended March 30, 2024 and a comparison to
prior year:
Quarter Ended March 30,
2024
Quarter Ended April 1,
2023
As Reported
Impact from Foreign
Currency1
Less U.S. Hosiery
Divestiture2
Organic Constant
Currency
As Reported
Less U.S. Hosiery
Divestiture2
Organic
% Change,
As Reported
% Change, Organic
Constant Currency
Net sales
$
1,156,201
$
(14,560
)
$
—
$
1,170,761
$
1,389,410
$
19,585
$
1,369,825
(16.8
)%
(14.5
)%
1
Effect of the change in foreign currency
exchange rates year-over-year. Calculated by applying prior period
exchange rates to the current year financial results.
2
The Company sold its U.S. Sheer Hosiery
business on September 29, 2023.
TABLE 3
HANESBRANDS INC.
Supplemental Financial
Information
By Business Segment
(in thousands)
(Unaudited)
Quarters Ended
March 30, 2024
April 1, 2023
% Change
Segment net sales:
Innerwear
$
506,843
$
553,067
(8.4
)%
Activewear
217,749
314,945
(30.9
)
International
406,031
462,857
(12.3
)
Other
25,578
58,541
(56.3
)
Total net sales
$
1,156,201
$
1,389,410
(16.8
)%
Segment operating profit:
Innerwear
$
111,052
$
72,608
52.9
%
Activewear
1,109
9,974
(88.9
)
International
49,882
51,349
(2.9
)
Other
(9,577
)
(4,874
)
96.5
General corporate expenses/other
(68,639
)
(65,617
)
4.6
Total operating profit before
restructuring and other action-related charges
83,827
63,440
32.1
Restructuring and other action-related
charges
(31,721
)
(6,121
)
418.2
Total operating profit
$
52,106
$
57,319
(9.1
)%
Quarters Ended
March 30, 2024
April 1, 2023
Basis Points Change
Segment operating margin:
Innerwear
21.9
%
13.1
%
878
Activewear
0.5
3.2
(266
)
International
12.3
11.1
119
Other
(37.4
)
(8.3
)
(2,912
)
General corporate expenses/other
(5.9
)
(4.7
)
(121
)
Total operating margin before
restructuring and other action-related charges
7.3
4.6
268
Restructuring and other action-related
charges
(2.7
)
(0.4
)
(230
)
Total operating margin
4.5
%
4.1
%
38
TABLE 4
HANESBRANDS INC.
Condensed Consolidated Balance
Sheets
(in thousands)
(Unaudited)
March 30, 2024
December 30,
2023
April 1, 2023
Assets
Cash and cash equivalents
$
191,216
$
205,501
$
213,209
Trade accounts receivable, net
555,679
557,729
681,921
Inventories
1,419,309
1,368,018
1,969,133
Other current assets
157,510
144,967
159,724
Current assets held for sale
—
—
4,986
Total current assets
2,323,714
2,276,215
3,028,973
Property, net
398,089
414,366
442,315
Right-of-use assets
399,312
428,918
454,643
Trademarks and other identifiable
intangibles, net
1,197,310
1,235,704
1,241,624
Goodwill
1,099,858
1,112,744
1,106,590
Deferred tax assets
21,003
21,954
21,732
Other noncurrent assets
150,390
150,413
136,803
Total assets
$
5,589,676
$
5,640,314
$
6,432,680
Liabilities
Accounts payable
$
816,298
$
736,252
$
965,630
Accrued liabilities
477,524
478,676
474,840
Lease liabilities
103,867
110,640
100,266
Accounts Receivable Securitization
Facility
17,500
6,000
166,000
Current portion of long-term debt
44,250
59,000
52,750
Current liabilities held for sale
—
—
4,986
Total current liabilities
1,459,439
1,390,568
1,764,472
Long-term debt
3,237,419
3,235,640
3,588,945
Lease liabilities - noncurrent
328,150
354,015
379,365
Pension and postretirement benefits
100,132
104,255
113,649
Other noncurrent liabilities
126,362
136,483
246,723
Total liabilities
5,251,502
5,220,961
6,093,154
Stockholders’ equity
Preferred stock
—
—
—
Common stock
3,515
3,501
3,495
Additional paid-in capital
354,760
353,367
336,851
Retained earnings
515,772
554,796
537,702
Accumulated other comprehensive loss
(535,873
)
(492,311
)
(538,522
)
Total stockholders’ equity
338,174
419,353
339,526
Total liabilities and stockholders’
equity
$
5,589,676
$
5,640,314
$
6,432,680
TABLE 5
HANESBRANDS INC.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Quarters Ended
March 30, 2024
April 1, 2023
Operating Activities:
Net loss
$
(39,122
)
$
(34,404
)
Adjustments to reconcile net loss to net
cash from operating activities:
Depreciation
17,674
17,360
Amortization of acquisition
intangibles
4,103
4,186
Other amortization
3,299
2,805
Loss on extinguishment of debt
—
8,466
Gain on classification of assets held for
sale
—
(2,139
)
Amortization of debt issuance costs and
debt discount
2,544
1,973
Other
(2,381
)
5,202
Changes in assets and liabilities:
Accounts receivable
(3,294
)
51,643
Inventories
(59,379
)
7,861
Other assets
(7,554
)
(10,761
)
Accounts payable
103,065
43,171
Accrued pension and postretirement
benefits
181
1,479
Accrued liabilities and other
7,035
(52,305
)
Net cash from operating activities
26,171
44,537
Investing Activities:
Capital expenditures
(20,257
)
(24,244
)
Other
28
18,944
Net cash from investing activities
(20,229
)
(5,300
)
Financing Activities:
Borrowings on Term Loan Facilities
—
891,000
Repayments on Term Loan Facilities
(14,750
)
(6,250
)
Borrowings on Accounts Receivable
Securitization Facility
513,500
588,000
Repayments on Accounts Receivable
Securitization Facility
(502,000
)
(631,500
)
Borrowings on Revolving Loan
Facilities
316,000
421,500
Repayments on Revolving Loan
Facilities
(316,000
)
(461,000
)
Borrowings on Senior Notes
—
600,000
Repayments on Senior Notes
—
(1,436,884
)
Payments to amend and refinance credit
facilities
(178
)
(27,371
)
Other
(4,031
)
(1,675
)
Net cash from financing activities
(7,459
)
(64,180
)
Effect of changes in foreign exchange
rates on cash
(12,768
)
(261
)
Change in cash and cash equivalents
(14,285
)
(25,204
)
Cash and cash equivalents at beginning of
period
205,501
238,413
Cash and cash equivalents at end of
period
$
191,216
$
213,209
TABLE 6-A
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures
(in thousands, except per
share data)
(Unaudited)
The following tables present a
reconciliation of results as reported under GAAP to the results as
adjusted for the quarter ended March 30, 2024 and a comparison to
prior year. The Company has chosen to present the following
non-GAAP measures to investors to enable additional analyses of
past, present and future operating performance and as a
supplemental means of evaluating operations absent the effect of
the global Champion performance plan, the Full Potential
transformation plan and other actions that are deemed to be
material stand-alone initiatives apart from the Company’s core
operations. While these costs are not expected to continue for any
singular transaction on an ongoing basis, similar types of costs,
expenses and charges have occurred in prior periods and may recur
in future periods depending upon future business plans and
circumstances.
Restructuring and other action-related
charges in 2024 and 2023 include the following:
Global Champion performance plan
The global Champion performance plan
includes actions and related charges regarding the Company’s
accelerated and enhanced strategic initiatives to further
streamline the operations and position the brand for long term
profitable growth and the evaluation of strategic alternatives for
the global Champion business, which includes approximately $17
million of charges in the quarter ended March 30, 2024 related to
professional fees, severance and other costs. These charges are
primarily reflected in selling, general and administrative
expenses.
Supply chain segmentation
Represents charges related to supply chain
segmentation to restructure, consolidate and position the Company’s
distribution and manufacturing network to align with its Full
Potential transformation plan demand trends.
Headcount actions and related
severance
Represents charges related to operating
model initiatives primarily headcount actions and related severance
charges and adjustments as a result of the implementation of the
Company’s Full Potential transformation plan.
Technology
Represents technology charges related to
the implementation of the Company’s technology modernization
initiative which includes a global enterprise resource planning
platform under its Full Potential transformation plan.
Professional services
Represents professional fees, primarily
including consulting and advisory services, related to the
implementation of the Company’s Full Potential transformation
plan.
Gain/loss on classification of assets held
for sale
Represents the gain/loss to adjust the
valuation allowance related to the U.S. Sheer Hosiery business,
prior to the sale on September 29, 2023, primarily from the changes
in carrying value due to changes in working capital.
Loss on extinguishment of debt
Represents charges related to the
redemption of the Company’s 4.625% Senior Notes and 3.5% Senior
Notes in the first quarter of 2023.
Gain on final settlement of cross currency
swap contracts
Primarily represents the remaining gain
related to cross-currency swap contracts previously designated as
cash flow hedges in accumulated other comprehensive loss which was
released into earnings as the Company unwound the cross-currency
swap contracts in connection with the redemption of the 3.5% Senior
Notes at the time of settlement in the first quarter of 2023.
Tax effect on actions
Represents the applicable effective tax
rate on the restructuring and other action-related charges based on
the jurisdiction of where the charges were incurred.
Quarters Ended
March 30, 2024
April 1, 2023
Gross profit, as reported under
GAAP
$
460,927
$
449,693
As a % of net sales
39.9
%
32.4
%
Restructuring and other action-related
charges:
Global Champion performance plan
303
—
Full Potential transformation plan:
Supply chain segmentation
167
4,523
Headcount actions and related
severance
36
—
Gross profit, as adjusted
$
461,433
$
454,216
As a % of net sales
39.9
%
32.7
%
Quarters Ended
March 30, 2024
April 1, 2023
Selling, general and administrative
expenses, as reported under GAAP
$
408,821
$
392,374
As a % of net sales
35.4
%
28.2
%
Restructuring and other action-related
charges:
Global Champion performance plan
(16,449
)
—
Full Potential transformation plan:
Headcount actions and related
severance
(12,151
)
1,091
Supply chain segmentation
(1,940
)
—
Professional services
(490
)
(40
)
Technology
(181
)
(3,684
)
Gain on classification of assets held for
sale
—
2,139
Other
(4
)
(1,104
)
Selling, general and administrative
expenses, as adjusted
$
377,606
$
390,776
As a % of net sales
32.7
%
28.1
%
Quarters Ended
March 30, 2024
April 1, 2023
Operating profit, as reported under
GAAP
$
52,106
$
57,319
As a % of net sales
4.5
%
4.1
%
Restructuring and other action-related
charges:
Global Champion performance plan
16,752
—
Full Potential transformation plan:
Headcount actions and related
severance
12,187
(1,091
)
Supply chain segmentation
2,107
4,523
Professional services
490
40
Technology
181
3,684
Gain on classification of assets held for
sale
—
(2,139
)
Other
4
1,104
Operating profit, as adjusted
$
83,827
$
63,440
As a % of net sales
7.3
%
4.6
%
Quarters Ended
March 30, 2024
April 1, 2023
Interest expense, net and other
expenses, as reported under GAAP
$
75,960
$
73,223
Restructuring and other action-related
charges:
Loss on extinguishment of debt
—
(8,466
)
Gain on final settlement of cross currency
swaps
—
1,370
Interest expense, net and other expenses,
as adjusted
$
75,960
$
66,127
Quarters Ended
March 30, 2024
April 1, 2023
Loss before income taxes, as reported
under GAAP
$
(23,854
)
$
(15,904
)
Restructuring and other action-related
charges:
Global Champion performance plan
16,752
—
Full Potential transformation plan:
Headcount actions and related
severance
12,187
(1,091
)
Supply chain segmentation
2,107
4,523
Professional services
490
40
Technology
181
3,684
Gain on classification of assets held for
sale
—
(2,139
)
Other
4
1,104
Loss on extinguishment of debt
—
8,466
Gain on final settlement of cross currency
swaps
—
(1,370
)
Income (loss) before income taxes, as
adjusted
$
7,867
$
(2,687
)
Quarters Ended
March 30, 2024
April 1, 2023
Net loss, as reported under
GAAP
$
(39,122
)
$
(34,404
)
Restructuring and other action-related
charges:
Global Champion performance plan
16,752
—
Full Potential transformation plan:
Headcount actions and related
severance
12,187
(1,091
)
Supply chain segmentation
2,107
4,523
Professional services
490
40
Technology
181
3,684
Gain on classification of assets held for
sale
—
(2,139
)
Other
4
1,104
Loss on extinguishment of debt
—
8,466
Gain on final settlement of cross currency
swaps
—
(1,370
)
Tax effect on actions
—
—
Net loss, as adjusted
$
(7,401
)
$
(21,187
)
Quarters Ended1
March 30, 2024
April 1, 2023
Diluted loss per share, as reported
under GAAP
$
(0.11
)
$
(0.10
)
Restructuring and other action-related
charges:
Global Champion performance plan
0.05
—
Full Potential transformation plan:
Headcount actions and related
severance
0.03
0.00
Supply chain segmentation
0.01
0.01
Professional services
0.00
0.00
Technology
0.00
0.01
Gain on classification of assets held for
sale
—
(0.01
)
Other
0.00
0.00
Loss on extinguishment of debt
—
0.02
Gain on final settlement of cross currency
swaps
—
0.00
Tax effect on actions
—
—
Diluted loss per share, as adjusted
$
(0.02
)
$
(0.06
)
1
Amounts may not be additive due to
rounding.
Including the unfavorable foreign currency
impact of $3 million, global Champion sales excluding C9 Champion
decreased approximately 26% in the first quarter of 2024 compared
to the first quarter of 2023. On a constant currency basis, global
Champion sales excluding C9 Champion decreased approximately 25% in
the first quarter of 2024 compared to the first quarter of
2023.
TABLE 6-B
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures
(in thousands, except per
share data)
(Unaudited)
Last Twelve Months
March 30, 2024
April 1, 2023
Leverage Ratio:
EBITDA1:
Net loss
$
(22,444
)
$
(279,750
)
Interest expense, net
283,591
183,562
Income tax expense (benefit)
(10,598
)
479,022
Depreciation and amortization
105,762
104,332
Total EBITDA
356,311
487,166
Total restructuring and other
action-related charges (excluding tax effect on actions)2
141,504
68,273
Other net losses, charges and
expenses3
132,919
118,802
Total EBITDA, as adjusted
$
630,734
$
674,241
Net debt:
Debt (current and long-term debt and
Accounts Receivable Securitization Facility excluding long-term
debt issuance costs and debt discount of $34,331 and $40,055,
respectively)
$
3,333,500
$
3,847,750
(Less) debt related to an unrestricted
subsidiary4
(17,500
)
—
Other debt and cash adjustments5
4,043
4,640
(Less) Cash and cash equivalents
(191,216
)
(213,209
)
Net debt
$
3,128,827
$
3,639,181
Debt/Net loss6
(148.5
)
(13.8
)
Net debt/EBITDA, as adjusted7
5.0
5.4
1
Earnings before interest, taxes,
depreciation and amortization (EBITDA) is a non-GAAP financial
measure.
2
The last twelve months ended March 30,
2024 includes $105 million of global Champion performance plan
charges, $19 million of headcount actions and related severance
charges, $6 million of a loss on the sale of business and
classification of assets held for sale, $5 million of technology
charges, $4 million of professional services, $2 million of supply
chain segmentation charges and $1 million related to other
restructuring and other action-related charges. The last twelve
months ended April 1, 2023 includes $21 million of supply chain
segmentation charges, $16 million of professional services, $11
million of technology charges, $9 million of headcount actions and
related severance charges, $8 million of a loss on extinguishment
of debt, $3 million related to other restructuring and other
action-related charges, $1 million of a loss on classification of
assets held for sale and $(1) million of a gain on the final
settlement of cross currency swap contracts. The items included in
restructuring and other action-related charges are described in
more detail in Table 6-A.
3
Represents other net losses, charges and
expenses that can be excluded from the Company’s leverage ratio as
defined under its Fifth Amended and Restated Credit Agreement,
dated November 19, 2021, as amended. The last twelve months ended
March 30, 2024, primarily includes $84 million of excess and
obsolete inventory write-offs, $21 million in other compensation
related items primarily stock compensation expense, $17 million of
pension non-cash expense, $13 million in charges related to sales
incentive amortization, $11 million of non-cash cloud computing
expense, $1 million in charges related to the ransomware attack and
extraordinary events, $(4) million of recovery of bad debt expense,
$(4) million of net unrealized gains due to hedging activities and
a $(6) million adjustment for interest expense on debt and
amortization of debt issuance costs related to an unrestricted
subsidiary. The last twelve months ended April 1, 2023, primarily
includes $36 million of excess and obsolete inventory write-offs,
$32 million in charges related to the ransomware attack and
extraordinary events, $23 million in other compensation related
items primarily stock compensation expense, $20 million of pension
non-cash expense, $5 million of bad debt expense and $3 million of
non-cash cloud computing expense.
4
Represents amounts outstanding under an
existing accounts receivable securitization facility entered into
by an unrestricted subsidiary of the Company.
5
Includes drawn and undrawn letters of
credit, financing leases and cash balances in certain
geographies.
6
Represents Debt divided by Net loss, which
is the most comparable GAAP financial measure to Net debt/EBITDA,
as adjusted.
7
Represents the Company’s leverage ratio
defined as Consolidated Net Total Leverage Ratio under its Fifth
Amended and Restated Credit Agreement, dated November 19, 2021, as
amended, which excludes other net losses, charges and expenses in
addition to restructuring and other action-related charges.
Quarters Ended
March 30, 2024
April 1, 2023
Free cash flow:
Net cash from operating activities
$
26,171
$
44,537
Capital expenditures
(20,257
)
(24,244
)
Free cash flow
$
5,914
$
20,293
TABLE 7
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of GAAP Outlook
to Adjusted Outlook
(in thousands, except per
share data)
(Unaudited)
Quarter Ended
Year Ended
June 29, 2024
December 28,
2024
Operating profit outlook, as calculated
under GAAP
$96,000 to $111,000
$430,000 to $450,000
Restructuring and other action-related
charges outlook
19,000
70,000
Operating profit outlook, as adjusted
$115,000 to $130,000
$500,000 to $520,000
Diluted earnings per share outlook, as
calculated under GAAP1
$0.02 to $0.06
$0.22 to $0.28
Restructuring and other action-related
charges outlook
0.05
0.20
Diluted earnings per share outlook, as
adjusted
$0.07 to $0.11
$0.42 to $0.48
Cash flow from operations outlook, as
calculated under GAAP
$400,000
Capital expenditures outlook
65,000
Free cash flow outlook
$335,000
1
The Company expects approximately 353
million diluted weighted average shares outstanding for the quarter
ended June 29, 2024 and approximately 354 million diluted weighted
average shares outstanding for the year ended December 28,
2024.
The Company is unable to reconcile
projections of financial performance beyond 2024 without
unreasonable efforts, because the Company cannot predict, with a
reasonable degree of certainty, the type and extent of certain
items that would be expected to impact these figures in 2024 and
beyond, such as net sales, operating profit, tax rates and action
related charges.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240509559065/en/
News Media contact: Nicole Ducouer (336) 986-7090 Analysts and
Investors contact: T.C. Robillard (336) 519-2115
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