Hanesbrands reported increases in its global sales of Champion products of 20 percent in absolute terms and 33 percent excluding discontinued operations such as the C9 mass market program in the U.S., during the third quarter ended Oct. 2, with balanced performances between the U.S. and the rest of the world. The group said they were driven by strong consumer demand across all sales channels, continued growth in Europe and the ramp-up of distribution partners in China, where the brand didn’t suffer the anti-Western sentiment that hit some other sports brands.
A $25 million increase in marketing expenses across the group, including its innerwear business, contributed to improve Champion’s global brand awareness, Hanesbrands noted. Following improvements in e-commerce, the group’s total online sales were up by 62 percent, with a growth of 50 percent at company-owned websites.
The revenues from Hanesbrands’ activewear segment, which includes Champion’s sales in the U.S., were up by 42 percent to $138 million in the quarter, as the segment continued to benefit from pent-up demand and the overlap from a period a year ago that was affected by Covid headwinds. The segment’s operating margin rose by about 7.4 percentage points to 16.5 percent thanks to the higher revenues and an improved business mix.
As compared to the third quarter of 2019, the activewear segment generated 4 percent higher sales, with a 14 percent increase at Champion more than offsetting declines in other brands, but the operating margin was about 0.1 percentage points lower.
In the international segment, which includes Champion’s operations outside the U.S., Hanesbrands’ revenues were up by 6 percent from the year-ago level, with increases of 9 percent in dollars and 7 percent in local currencies excluding $13 million in sales of face masks. On a currency-neutral basis, segment sales grew in the Americas, Europe and China, but declined in Japan and were flat in Australia. The segment’s operating margin decreased by 3.85 percentage points to 16.1 percent.
The international segment showed an increase of just over one percent as compared to the third quarter of 2019, in spite of strong growth in Europe, the Americas and parts of Asia. The operating margin was down by 2.4 percentage points.
Hanesbrands’ total revenues from continuing operations, excluding the European innerwear business being divested, went up by 6 percent to $1.79 billion, with a growth of 5 percent in constant currencies, in spite of the impact of extended Covid-related lockdowns in Australia and Japan.
As compared to the pre-pandemic third quarter of 2019, Hanesbrands’ sales from continuing operations were up by 11 percent in dollars and 10 percent in local currencies, including a 20 percent increase for Champion on a global basis.
As compared to a year ago, the group’s gross margin increased by 2.5 percentage points to 39.1 percent, and it was 0.65 percentage points higher than in the 2019 period. Cost-saving programs in the supply chain and a better business mix more than offset higher transportation costs and general inflation.
Increased marketing investments and higher distribution costs were more than offset by the improved gross margins, leading to a better adjusted operating margin of 14.7 percent, with increases of about 0.5 percentage points from last year and 0.4 points from 2019.
Inventories were down by 18 percent year-on-year at the end of the quarter, but the manageent said the group has sufficient supply to respond to the demand through the holiday period. It touted the group’s diversified sourcing base in Asia and Latin America as a shield against supply chain disruptions, but admitted that it was not immune to logistics challenges.
The group expects to achieve a sales increase of 8 percent on an adjusted basis and an operating margin of around 12 percent in the fourth quarter. This would contribute to a growth for the full year of around 11 percent to between $6.76 billion and $6.83 billion at continuing operations, including a projected foreign currency gain of around $108 million. Hanesbrands is projecting an adjusted operating margin of 13.5 percent for the year.
