Underwear and T-shirt maker Hanesbrands has posted a 39.1% plummet in third-quarter earnings as it was hit by the cost of separating from owner Sara Lee Corp last month. The company also gave investors another taster of the operational changes and growth strategies on the way.

Quarterly net income dropped to US$50.3m from $82.6m last year, while net sales fell 1.7% to $1.12bn from $1.14bn a year ago.

Sales declined 1.7% to $1.12bn from $1.14bn in the year-ago quarter, hurt by the withdrawal of low-margin product lines and lower sales of sheer hosiery.

Operating profit at the company, whose brands include Champion, Playtex, Bali and Wonderbra, fell by 9.6% to $93.9m from $103.8m a year ago.

"The results for our September quarter and comparisons to a year ago are influenced by the spinoff from Sara Lee and the resulting capital structure of the company that took place in the quarter," said CEO Richard A Noll.

The company - which began operating as an independent publicly traded business on 5 September - also cited increased interest expense, reduced operating profit and a higher income tax rate as reasons behind the earnings fall.

"We are pleased to have successfully completed our spinoff in the quarter and are focused on driving results, executing our strategies and establishing the base from which to achieve our long-term growth goals," Noll said.

"Our year-over-year sales decline was expected due to the exit from low-margin sales and as a result of continued sheer hosiery sales declines that are following a decade-long downward trend," he added. "Core sales were generally consistent with last year."

Noll told analysts the company was making good inroads in executing growth strategies and that Hanesbrands will build its "largest, strongest brands in core categories by driving innovation in key items."

Speaking during a conference call, Noll referred to the successful launch of tag-less men's tops, which have taken men's underwear T-shirts - a category suffering 2% yearly decreases - to a business with growth of 8% a year. This was done with a mix of strategies including PR and advertising, which cemented the concept in consumers' minds, Noll added.

Hanesbrands will now work with retail partners to grow the share of the "highly-fragmented" T-shirt market, which the company has a leading foothold in but that still only equates to 5%, Noll pointed out.

The Hanes brand is "a clear priority," he continued, but added "Champion is a great franchise doing extremely well…Playtex is extremely strong…we will continue to innovate for its loyal customers."

Hanesbrands is also very aware of the need to reduce costs. This will include consolidating the company and globalising the supply chain but also paying down debt and driving EPS growth.

"Sara Lee was very decentralised with more than nine operating units," Noll told investors. "For Hanesbrands to be successful, we decided we needed one integrated operating company," he said, defending the recent spate of closures and consolidations.

In fact, the process in only halfway through, Noll said: "There are still a number of functional areas to be consolidated. This will happen in a slow, evolutionary manner as we standardise processes and eventually consolidate IT systems."

Another area to see changes will be the supply chain, as the firm continues to reduce its presence in the US and balances the chain over the western and eastern hemispheres.

"The mix between the Caribbean basin and Asia will equalise in the longer term," Noll said.

"Last week we announced that we have entered into a definitive agreement to purchase a sewing operation in Thailand, our first owned sewing operation in Asia. Our strategy is to have a low-cost supply chain, and in today's environment, that requires that we operate on a global basis."

Hanesbrands hopes the strategy and all of its plans will lead to long-term annual revenue growth of 1%-3% excluding acquisitions with double-digit growth in diluted EPS, excluding the effect of restructuring charges.

The company expects to incur approximately $250m in restructuring and related charges over the next three years to implement its cost-savings plan.

It added it does not foresee "any significant commercial acquisitions" but said: "…tactical acquisition opportunities may be considered to accelerate the company's global supply chain and cost-reduction strategy."

By Rebecca Danton.