The “Full Potential” roadmap set by Steve Bratspies, who became the CEO of Hanesbrands last summer, calls for Champion to achieve a compound average growth rate (CAGR) of 14 percent in the next three years, taking its annual turnover from about $2 billion this year to $3 billion by 2024. Higher marketing investments and collaborations with designers, athletes and other celebrities will be meant to position Champion as a strong and cool global lifestyle and athletic brand in a post-pandemic world.
A big push outside the U.S. will be part of the program, focusing on the Big 5 European markets, China, Japan and South Korea through the digital DTC and wholesale channels as well as distributors. The product offering will be expanded into women’s and children’s apparel as well as baselayers.
The group has decided to shed its European innerwear business, which contributed a loss of $43.3 million on flat revenues of $598 million last year. The development of that segment in the rest of the world is expected to add incremental annual sales of $200 million by 2024, contributing to raise Hanesbrands’ total turnover from $6.25 billion to $7.4 billion, which implies a CAGR of 6 percent. The operating margin is seen going up by one percentage point to 14.3 percent, in spite of a doubling in brand marketing investments to about 4 percent of sales, thanks to cost cuts and incremental investment of $100 million per year on new technologies and the supply chain.
For the first quarter of 2021, Hanesbrands has reported a big net loss of $263.3 million, up from a loss of $7.8 million in the year-ago period, due to a big writedown on the European innerwear business, which has become a discontinued operation. Excluding the writedown and other charges, adjusted net income from continuing operations rose to $136.5 million from $25.9 million.
Total revenues from continuing operations rose by 25 percent to $1,508 million. Champion’s business in the U.S. jumped by 34, taking the U.S. activewear segment 26 percent higher at $364.0 million, thanks in part to the U.S. government’s recent consumption stimulus. The segment’s operating profit rose more than sixfold to $60.6 million.
International revenues, which include the Champion business outside the U.S., went up by 18 percent to $506.3 million, but were up by only 8 percent in local currencies, with increases in Europe and other parts of the world except for Japan. The operating profit rose by 72 percent to $87.2 million.
The company’s gross margin improved by 5.2 percentage points to 40.0 percent, thanks in part to a more favorable product mix and foreign exchange gains, partially offset by higher transportation costs including some air freight.
The management is guiding for an indicative net profit of about $482 million this year on sales of $6.2-6.3 billion, rising by 19 percent excluding last year’s temporary tailwind of $820 million from the recently discontinued manufacture of face masks.