HanesBrands’ Registers Fourth-Quarter Sales Momentum
HanesBrands Inc. has announced its fourth-quarter results, reporting an increase in net sales and continued momentum across its business. Winston-Salem, North Carolina-based HanesBrands participates in the promotional products industry as suppliers Hanes/Champion/ComfortWash (PPAI 191138, S10) and Alternative Apparel (PPAI 217134, S5).
Net sales for fourth quarter, which ended January 2, were $1.8 billion, compared with $1.75 billion for the comparable period that ended December 28, 2019. The company recorded $28 million in revenue from personal protective garments (PPE) globally in the fourth quarter. Excluding net sales of $88 million from the exited C9 Champion mass program and DKNY intimate apparel license recorded in the prior-year period, and the effect of changes in foreign exchange rates, total constant-currency fourth-quarter net sales increased six percent.
For the full year, net sales were $6.7 billion, including net sales of $959 million of PPE, compared to $6.97 billion in the prior year, which included net sales of $419 million from the C9 Champion mass program and DKNY intimate apparel license. Excluding the exited programs and the effect of changes in foreign exchange rates, total constant-currency net sales for full-year 2020 increased 2 percent over the prior year.
“I’m extremely proud of the HanesBrands team for all it accomplished in 2020 under very challenging conditions, and I thank our global associates for their hard work and dedication,” says HanesBrands CEO Steve Bratspies. “We delivered solid sales growth in the fourth quarter, with continued revenue momentum in our largest businesses and strong market share performance in our Innerwear and Activewear segments.”
During the fourth quarter, the company completed a comprehensive business assessment and began implementing its Full Potential plan. The 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 ecommerce excellence across channels and streamline its global portfolio.
The company says that it has identified 20 strategic initiatives under these four key pillars to unlock growth and has launched a multi-year cost-savings program intended to substantially self-fund the investments necessary to achieve the Full Potential plan’s objectives. HanesBrands expects to provide a comprehensive overview of the Full Potential plan at its virtual Investor Day in May.
“We are implementing our Full Potential plan with the goal of creating a consumer-centric company that delivers long-term growth and higher profitability,” Bratspies says. “I’m encouraged by our rapid progress as we work to simplify our business and transform our organization to move faster, lower costs and focus on our highest-return growth opportunities.”
As part of the implementation of its Full Potential plan, the company determined that it no longer views PPE as a long-term growth opportunity. In addition, as the result of a comprehensive strategic inventory review, it is reducing its SKUs by 20 percent to enable greater focus on its highest-volume, fastest-growing and most profitable products. As a result of these decisions, during the fourth quarter, HanesBrands recorded $611 million (96 percent non-cash) in inventory charges consisting of a $400 million write-off of its entire PPE inventory-related balance and an inventory valuation write-down of approximately $211 million related to the company’s SKU reduction program. In addition, the company announced plans to explore strategic alternatives for its European Innerwear business in order to further simplify its operations and focus resources on its strategic growth opportunities.
Fourth-quarter GAAP operating loss totaled $444 million, including the $611 million inventory charges, as well as a $25 million non-cash impairment charge on its U.S. hosiery business due to impacts of COVID-19, a $17 million non-cash tax asset write-off and an $8 million charge primarily related to a previously disclosed supply chain restructuring. Excluding these charges, fourth-quarter adjusted operating profit of $217 million decreased 10 percent as compared with the comparable period. Fourth-quarter GAAP net loss totaled $332 million, or $0.95 per share, compared to net income of $185 million, or $0.51 per diluted share in the prior year period. Adjusted net income excluding after-tax charges of $467 million, or $1.33 per diluted share, totaled $135 million, or $0.38 per diluted share.