HanesBrands plans to grow the Champion brand globally

HanesBrands plans to grow the Champion brand globally

T-shirt and activewear maker HanesBrands has revealed plans to exit its personal protective garments (PPE) business and explore strategic alternatives for its European innerwear unit as it looks to create a more consumer-centric company.

The company's stock price soared nearly 25% in early morning trading today (10 February) on the news, which follows the completion of a comprehensive business assessment.

Its 'Full Potential' plan focuses the company on four pillars to "drive growth and enhance long-term profitability": grow the Champion brand globally, drive growth in innerwear with brands and products that appeal to younger consumers, build e-commerce excellence across channels, and streamline its global portfolio.

As such, the Winston-Salem, North Carolina-based company has identified 20 strategic initiatives under these four pillars, and has launched a multi-year cost savings programme intended to substantially self-fund the investments necessary to achieve the plan's objectives.

"We are implementing our Full Potential plan with the goal of creating a consumer-centric company that delivers long-term growth and higher profitability," said CEO Steve Bratspies. "I'm encouraged by our rapid progress as we work to simplify our business and transform our organisation to move faster, lower costs and focus on our highest-return growth opportunities."

The company says as part of the implementation of its Full Potential plan, it determined that it no longer views PPE as a long-term growth opportunity. In addition, it is reducing its SKUs by 20% to enable greater focus on its highest-volume, fastest-growing, and most profitable products.

Meanwhile, HanesBrands says it is also exploring strategic alternatives for its European innerwear business in order to further simplify its operations and instead focus on growth opportunities.

The company is expected to go into further detail about the plan during its virtual investor day, planned for May.

The announcement was made as part of its fourth-quarter trading update for the period ended 2 January.

Sales in the quarter were up 2.8% to US$1.8bn from $1.75bn a year earlier. Of this figure, $28m was from global sales of PPE.

For the full year, sales were down slightly to $6.66bn, including net sales of $959m of PPE, compared to $6.97bn in the prior year.

Quarterly revenue growth continued across all three business segments as year-over-year trends improved sequentially, excluding PPE. The company gained share in US innerwear, and global Champion sales were up 11% in constant currency. Excluding PPE, sales increased 13%.

US activewear marked its third consecutive quarter of sequential improvement, led by strong performance of the Champion brand. Revenue increased 7% on a rebased basis, driven by growth in the online, wholesale and distributor channels.

International revenue, meanwhile, increased 2%. Excluding $6m in PPE sales, core international revenue increased 1%.

Fourth-quarter GAAP net losses totalled $332m, versus earnings of $185m a year ago. For the full year, losses amounted to $75.6m from earnings of $600.7m in 2019.

HanesBrands took a $611m inventory charge in the quarter, including $400m to write-off its inventory-related balance and $211m for the SKU reduction.

Looking to the first quarter, the company says its guidance reflects continued uncertainty related to the pandemic and its impact on the global consumer environment. HanesBrands is expecting net sales to total about $1.48bn-$1.51bn, and GAAP operating profit to range from $140m-$150m. Adjusted operating profit is expected to range from $150m to $160m.

The company began ramping up the production of masks and protective garments in response to the global coronavirus pandemic in May of last year. The CEO at the time, Gerald Evans, said: "We are currently manufacturing reusable facemasks for the US government, as well as launching a Hanes branded consumer programme for several customers. Combined, we believe these programmes can generate well over $300m of sales in 2020."