Hanesbrands, the parent company of Champion, said that its results for the first quarter ended on March 28 were disrupted by the effects of the Covid-19 crisis, with an unprecedented drop in sales and profit in the last two weeks of the quarter. Quarterly sales of $1.32 billion represented a 17 percent decline as compared to the first quarter a year ago.
The first quarter of last year included $94 million from the C9 Champion mass program and the DKNY intimate apparel license. Excluding these exited programs, as well as the impact of Covid-19 and foreign exchange rates, sales for the first quarter of 2020 would have increased by 1.6 percent at constant currencies. Operating profit and adjusted operating profit were $34 million and $63 million, respectively, down from $150 million and $171 million a year ago. The company estimated the impact of the pandemic in terms of reduced revenues at around $181 million, with a negative impact on operating profit of around $86 million.
The impact of the pandemic was particularly strong on the international front, considering that about 1,000 out of the 1,200 directly managed stores of the group, including Champion stores, are located outside the U.S. On the other hand, the group’s sales over the internet grew by 5 percent during the quarter, accelerating toward the end of it.
Including Champion’s opertions outside the U.S., the group’s international segment saw sales and operating earnings decline by 14 precent and 48 percent, respectively. In local currencies the rates of the decreases amounted to 11 percent and 47 percent. Prior to the impact of the pandemic, the International segment constant-currency sales were in line with expectations.
In the U.S. Activewear segment, sales in the first quarter, when rebased for the C9 Champion program exit, decreased by 10 percent. Prior to mid-March, this segment had a higher-than-expected performance, with continued consumer demand for the Champion brand.
On the bright side, the company’s operating cash flow improved by more than $100 million during the quarter despite the pandemic. Also, the company is now producing more than 320 million cloth face coverings as well as more than 20 million medical gowns for the U.S. government. Moreover, Hanesbrands is ramping up production to launch a cotton face mask business for consumers and B2B customers. The company expects personal protective garments for consumer, commercial and governmental markets to become an ongoing product line, with sales of more than $300 million in 2020 and the potential to further expand in the future.
