Thanks to an expanded product range and wider distribution, Champion’s global sales rose by 40 percent to $1.9 billion in the financial year ended on Dec. 28 excluding the brand’s mass market operations in the U.S., which have been terminated.
With a projected growth of 10 percent this year, they are expected to land well above the $2 billion milestone two years ahead of schedule, with another $1 billion due to be added in the next 4-5 years, according to its parent company, Hanesbrands. A move into outerwear and new partnerships in footwear could help achieve the goal, the group’s management indicated while announcing its results.
On an organic basis, Champion grew by 22 percent in the U.S. as well as in the rest of the world in the fourth quarter. With global sales of $460 million excluding the mass market, the brand made a major contribution to the total turnover of Hanesbrands, which actually decreased by 1 percent to $1.75 billion, with a slight increase in local currencies. The group’s net income rose by 23 percent to $184.9 million, however.
The group’s international segment, which includes Champion’s business outside the U.S. and other foreign operations, grew by 10 percent in constant currencies, but its operating profit declined due to foreign currency losses and a bankruptcy-related expense. Across the group, the operating margin improved by 0.4 percentage points to 15.0 percent in the latest quarter, benefiting from price increases and higher profitability in innerwear, where the margin reached 24.6 percent.
For the full financial year, Hanesbrands’ total sales grew by 2 percent to $6.97 billion, going up by 4 percent in constant currencies and on an organic basis. Rising by 16 percent, consumer-direct sales represented 25 percent of total revenues for the year, with a peak of 30 percent during the fourth quarter. The annual net profit rose by 11 percent to $600.7 million.
Net earnings are expected to be more or less flat this year on sales of about $6.7 billion, excluding Champion’s contract with Target, which may be replaced by a contract with another retailer. On an adjusted basis, the group’s forecast for this year calls for an increase of about 3.5 percent in U.S. activewear sales to around $1.55 billion, excluding the terminated Champion program with Target. It calls for a currency-neutral increase of 6 percent to $2.65 billion in international sales.
The adjusted operating profit should go up by 7 percent to between $900 million and $930 million, including an expected foreign currency loss of $3 million. The company is likely to implement some price increases in some foreign markets to offset the resulting cost pressure. However, higher investments intended to support expanded distribution for Champion in Asia should contribute to lower the operating margin on international sales.