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    HanesBrands Inc (HBI)

    Q4 2023 Earnings Summary

    Reported on Jan 16, 2025 (Before Market Open)
    Pre-Earnings Price$4.72Last close (Feb 14, 2024)
    Post-Earnings Price$4.64Open (Feb 15, 2024)
    Price Change
    $-0.08(-1.69%)
    • Gross margin is expected to improve to 38.5% in 2024, returning to pre-inflationary levels, with high confidence due to visibility of input costs and cost savings initiatives. The company has built conservatism into their profit outlook to hedge against sales volatility. ,
    • Innerwear business is gaining market share and expanding margins, outpacing the category with innovative products and increased retail shelf space. Innerwear margins expanded from 8.3% in Q4 2022 to 21.1% in Q4 2023. The company expects further growth with new product launches and increased marketing investments in 2024. , ,
    • Champion brand is expected to improve in the back half of 2024, after troughing in the first half, driven by strategic initiatives, inventory cleanup, and new product launches. The company is confident in a pivot to a more positive space for the brand, with plans to spend more on marketing to drive growth. , ,
    • Hanesbrands projects a significant decline in U.S. Activewear sales of approximately 30% in Q1 2024, indicating ongoing challenges in this segment.
    • The Innerwear category is experiencing declines, with the company expecting mid-single-digit decreases in Q1, despite it being a traditionally stable, replenishment-driven category, raising concerns about market conditions.
    • The company's outlook relies on significant improvement in the back half of the year, particularly for the Champion brand, but given past underperformance and the challenging consumer environment, there is uncertainty around these projections.
    1. Champion Margin Improvement
      Q: What's the plan to improve Champion's margins in fiscal '24?
      A: Management acknowledges that Champion's margins were pressured in 2023 due to higher inflationary costs but expects recovery in 2024. They anticipate reaching a 38.5% gross margin throughout 2024, citing lower input costs and cost savings already in place.

    2. Confidence in Sales Reacceleration
      Q: What gives you confidence the business can reaccelerate after Q1 declines?
      A: Management believes the business will improve throughout 2024, driven by innovation launches, increased marketing spend, and improvements in the Champion brand. They expect Innerwear to rebound due to new products and marketing, and anticipate Champion to trough in the first half and grow in the back half as they launch new lines and clean up channel inventory.

    3. Innerwear Outlook
      Q: What are your expectations for Innerwear in fiscal '24?
      A: Management expects Innerwear to outperform the category, leveraging innovation and permanent retail space gains. Innerwear margins have improved over the last five quarters, reaching 21.1% in Q4, demonstrating recovery to pre-inflationary levels.

    4. Gross Margin Guidance
      Q: Are you expecting a 38.5% gross margin for the year?
      A: Yes, management confirms they expect a 38.5% gross margin for 2024, holding steady throughout the year due to visibility into input costs and cost savings.

    5. Cash Flow and Inventory Impact
      Q: What should we expect for cash from operations and the impact of inventory?
      A: Management anticipates $400 million in cash flow for 2024, with about two-thirds from profit and one-third from working capital improvements, including inventory reductions. They ended 2023 with inventory $130 million below target, suggesting further opportunities to optimize working capital.

    6. Inventory Levels and Channel Cleanup
      Q: Where are inventory levels for Hanes vs. Champion?
      A: Inventory levels are balanced across the portfolio, with total inventory at $1.37 billion, putting them in a good position. They are cleaning up Champion's channel inventories to prepare for the fall/winter line, expecting to improve sales in the back half of the year.

    7. Innerwear Category Decline
      Q: Why has the Innerwear category been down, and what's the projection?
      A: The Innerwear category was down 3% in 2023 and 5% in Q4, influenced by consumer environment challenges. Management expects the category to return to its historical 1% unit growth, with their business outpacing the category due to share gains and upcoming innovations.

    8. Champion Shelf Space Risk
      Q: Is there a risk of losing shelf space for Champion?
      A: Management is confident in maintaining shelf space by delivering innovative, consumer-relevant products. They acknowledge past declines but are focusing on product innovation and marketing to drive growth, expecting the brand to improve in the back half of the year.

    9. Permanent Retail Space Gains
      Q: What net increase are you seeing in permanent space gains for Innerwear?
      A: Management reports gaining permanent space in key accounts driven by innovation, with incremental space taken from other national brands. They are seeing opportunities as private label brands lose share, allowing them to capture more shelf space.

    10. Specific Guidance for Segments
      Q: Can you provide specific guidance for Champion and Innerwear?
      A: While not providing specific segment guidance, management expects U.S. Innerwear to be down mid-single digits in Q1, aligning with the category, and U.S. Activewear to be down approximately 30% due to prior year timing benefits and business model changes. They anticipate improvement in the latter half of the year.

    11. Gross Margin Seasonality
      Q: Is there seasonality in gross margins to keep in mind?
      A: Management expects gross margins to remain steady throughout 2024 at 38.5%, rather than exhibiting significant seasonality, due to good visibility into input costs and cost savings.

    12. Size of Australia Business
      Q: What is the size of the Australia business?
      A: While not providing exact figures, management indicates the Australia business represents about 5% of total Hanesbrands Inc., with the majority in the Innerwear segment.