HanesBrands Announces Multiyear Growth Initiative
HanesBrands has launched a multiyear initiative to increase investment for growth, reduce costs and drive cash flow for the Winston-Salem, North Carolina-based company which participates in the promotional products industry as supplier Hanes/Champion (PPAI 191138). The initiative is expected to drive the company’s “Sell More, Spend Less, Generate Cash” business strategy.
By 2020, Project Booster is expected to generate approximately $300 million of incremental annual net cash from operations and $100 million in annualized net cost savings after annualized growth reinvestment of $50 million. The company’s incremental growth efforts will focus on leveraging its global Champion activewear business, increasing global online and omnichannel sales, and investing in brand building. The project launched in the first quarter and is expected to be neutral to full-year operating results in 2017, while providing significant benefits in coming years.
“We are off to the strong start of 2017 that we sought,” says Hanes Chief Executive Officer Gerald W. Evans Jr. “We had one of our best first quarters for cash flow as we executed a disciplined working capital plan. Acquisitions, our Champion brand and online sales are contributing to growth as we weather expected challenges in the retail environment. In addition, we are pleased to launch Project Booster, which we believe provides a clear roadmap to accelerating growth and value creation.”
The Booster initiative is expected to generate approximately $150 million in annualized cost savings. The company expects to reinvest approximately $50 million of the savings in targeted growth opportunities. Project Booster cost savings and working capital initiatives are expected to generate an incremental annual run rate of $300 million of cash from operations starting by the end of 2019.
“Our core ‘Sell More, Spend Less, Generate Cash’ strategy is effective and creating value, but we feel we have the opportunity to energize these efforts to drive additional benefits, particularly by taking advantage of the strong global commercial and supply chain scale we have created through acquisitions,” Evans says. “Project Booster will unlock value beyond our ongoing growth efforts and the synergies we are reaping from acquisition integrations.”
Growth investments under Project Booster will include marketing and brand building for its lineup of brands globally. Furthermore, changes to organization and capabilities take advantage of additional growth opportunities in online sales in the U.S. and its international retail and online operations. To fund these initiatives, reduce costs and increase cash flow, HanesBrands expects to reduce overhead, including head count, to reflect market trends and needs; drive additional supply chain optimization; and focus on inventory, inventory turns and other working capital improvements. Supply chain optimization plans including investing in its domestic distribution center network to better serve the online channel, realize procurement and product development savings, utilize global fabric platforms and silhouettes, and continue to internalize production.
In first quarter 2017, the company offered a voluntary separation program to headquarters employees and will make additional corporate head-count reductions during second quarter. In total, approximately 220 corporate employees are being separated, most through the voluntary program. Project Booster initiatives in 2017, including the head-count reductions, are expected to be cost-neutral for full-year 2017.