Faced with an operating environment that is weighing on its near-term performance in both innerwear and activewear, Hanesbrands is taking numerous actions to revitalize an activewear segment that includes its Champion business. The company, anticipating “a challenging consumer environment” for a period of time, continues to reduce its SKU count, lowering by more than 40 percent since a peak period to help improve productivity metrics, lower costs, improve inventory quality and create space for new product launches. Inventories were up 35 percent to nearly $2.14 billion at the third quarter end compared to Jan. 1, but the company is on track to meet its year-end inventory goal, it said.
In Q3 ended Oct. 1, overall net income declined 47 percent to $80.1 million from $152.8 million on a 6.6 percent drop in overall revenues to $1.67 billion from nearly $1.79 billion. The activewear segment operating profit slipped 30 percent to $53.5 million as the operating margin fell 487 basis points to 11.6 percent. Segment revenues, despite continued growth in the collegiate channel and solid gains in the printwear channel for the Champion and Hanes labels, were essentially flat at $461.0 million versus $462.5 million. The gains in the collegiate and printwear channels were offset by declines in other channels due to lower point-of-sale trends and higher activewear inventory levels at retail that sparked order cancellations, particularly for Champion. Overall, Champion brand sales fell 9 percent year-over-year, despite an increase in Europe, while other activewear brand sales rose 15 percent. International segment sales rose 5 percent on a constant currency basis (-6% as reported), fueled by Champion brand growth in Europe and innerwear sales expansion in Australia and the Other Americas. That gain was offset by lower Champion sales in certain Asian markets.
Hanesbrands’ CEO Steve Bratspies told analysts that the company is working on “a more disciplined product and channel segmentation” strategy for the “long-term benefit” of the Champion brand. Vanessa LeFebrve joined the company in August to lead its global activewear business with a particular focus on the Champion business strategy. Already, she has hired a new head designer for the brand in the U.S. and identified opportunities for global collaborations. Her Champion go-forward strategy is focused on brand identity improvements, product and channel segmentation and global merchandising. Ryan Wilson, who previously led Bonds’ omnichannel strategy in Australia, is now spearheading the activewear segment’s global e-commerce initiative.
The group’s current FY22 outlook for the 12 months ending Dec. 31, 2022, is calling for sales from continuing operations of $6.16-$6.21 billion, including a projected $196 million headwind from currency fluctuations. Operating profit from continuing operations will range between $512-$542 million.
