Hanesbrands, the Champion parent, faced with numerous near-term challenges that are not expected to wane during H1, has lowered its guidance and eliminated its quarterly dividend, as it aims to accelerate debt reduction and shore up its balance sheet.
Additionally, the company has delayed its long-term financial targets of $8 billion in annual net sales and an approximate 14.4 percent operating margin until the end of 2026. The news was not welcome on Wall Street, which sent HBI shares downward by nearly 23 percent at midday to $6.73 a share.
In Q4 ended Dec. 31, the overall net loss was $418,108,000 against a profit of $60,033,000 on a 16 percent drop in overall revenues to $1,473,286,000 from $1,752,349,000. Adjusted income from continuing operations, including $5 million in bad debt expense, was $24 million, compared with $156 million in the year-ago period. The year-end inventory level was up 25 percent year-over-year to $1.98 billion, but units were approximately 6 percent lower, hitting a corporate target. The quarterly operating profit slipped 61 percent to $60.3 million, as the gross margin fell 400 basis points to 34.1 percent.
Activewear operating profit plunged nearly 52 percent to $28.4 million on a 16 percent sales decline to $376.7 million. Continued growth in the collegiate channel for the Champion and Hanes brands was offset by declines in other channels, because of lower point-of-sale trends and higher activewear inventory levels at retail.
Champion sales fell 18 percent on a reported basis, including a 21 percent decline in the U.S. and a 13 percent dip in international markets. There was solid growth in Asia, led by Japan, and the collegiate market has rebounded and should continue to grow. Senior management said the brand’s new management team, led by Vanessa LeFebvre, is building a foundation for revenue and profitability growth that will include more product innovation, increased speed-to-market, renewed focus on direct-to-consumer and a channel-segmentation strategy. Footwear is still seen as a “big opportunity for the brand.” For the full year, HBI’s Activewear segment suffered a 35 percent decline in operating income to $153.7 million on a 7.4 percent revenue drop to $1,555,062,000.
The group’s FY23 outlook calls for $6.05 to $6.20 billion in net sales from continuing operations, including approximately $42 million in currency headwinds, and an adjusted operating profit from continuing operations of $500 to $550 million. There will be H1 margin pressure as Hanesbrands sells through the rest of its higher-cost inventory, but year-over-year margins should improve in H2.
