Hanesbrands, the parent company of Champion USA, saw its revenues for the fourth quarter grow by 2.9 percent to $1.8 billion, led by Champion. The revenues were well ahead of Wall Street’s consensus of $1.6 billion and caused the share price to surge by 25 percent.
However, the company ended with a $332.2 million loss for the three months ended Jan. 2, 2021, compared with a profit of $185 million last year, as it decided to exit the personal protective equipment (PPE) business following a review. Hanesbrands recorded $611 million in inventory charges consisting of a $400 million write-off of its entire PPE inventory-related balance and an inventory valuation write-down of approximately $211 million related to the company’s SKU reduction program. Excluding these and other extraordinary items, the adjusted operating profit of the group was down by 10 percent to $217 million as compared to the year-ago period.
Revenues from facemasks and other PPE products fell to just $28 million in the quarter. The company said the decision to exit PPE was taken after an in-depth review to develop a growth strategy better tailored to the post-pandemic world and to become more agile and consumer-centric. It is also intended to support the momentum in the Champion brand globally and intimate apparel in Australia, especially online. In particular, it will expand Champion’s focus on women’s and kids’ styles, as well as layered outerwear and casual athletic footwear. Hanesbrands’ new CEO, Steve Bratspies, also wants Champion to engage more directly with consumers through digital channels and to have a stronger presence in China, online and through mono-brand stores.
The Champion brand was a bright sport during the quarter, with global sales rising by 11 percent in constant currencies. The growth rate would have reached 18 percent excluding the sports and college licensing business, which has been hit by event cancellations and university shutdowns.
Champion is part of the group’s Activewear segment, where sales went up by 7.1 percent, led by e-commerce and the wholesale and distributor channels. In the Innerwear segment, sales increased by 19.7 percent, driven by kids’ underwear. Overall e-commerce soared by 46 percent to account for 21 percent of sales in the quarter. The group’s own digital sales represented about 27 percent of the total online business.
In the International segment, which includes Champion’s operations outside the U.S., sales progressed by 2.2 percent, lifted by growth in Australia, Canada and Latin America, which was offset by declines in Europe and Asia. Operating profits fell by 9 percent. The group is planning to explore strategic alternatives for the European Innerwear business.
For the full financial year, the company’s net loss reached $75.6 million, against a profit of $600 million the previous year, on revenues that declined by 4 percent to $6,664 million. Activewear sales dropped by 21 percent, Innerwear progressed by 33 percent and international sales fell by 9 percent.
Looking ahead to the first quarter, the management expects sales of $1,485 to $1,515 million, up by about 14 percent from the same quarter in 2020, generating operating income of $140 to $150 million.