Q4 2024 Earnings Summary
- Hanesbrands delivered strong operating performance in 2024, with operating margins up 400 basis points and finishing the year with a gross margin over 44%, demonstrating the power of their business model, and they expect further margin expansion in 2025, being a big step towards their goal of over 15% operating margins over time.
- The company is confident in achieving 1% organic constant currency growth in 2025, driven by innovation, brand investment, and new revenue streams such as scrubs business, fleece products, sleepwear products, and the 50th anniversary of the Hanes Beefy-T, indicating potential for sales growth.
- Hanesbrands is experiencing growth in international markets, notably in Australia where they saw 4% growth in Q4 due to strong online performance and successful new product launches like the Bonds Everyday Value line, suggesting global growth opportunities.
- Hanesbrands expects flat sales in the U.S. segment for 2025, indicating limited growth in its primary market.
- The company acknowledges that Australia remains a challenging market due to sticky inflation and low GDP growth, which may hinder international sales expansion.
- The announcement of CEO Stephen Bratspies' planned departure could introduce leadership uncertainty during a critical time of strategic execution.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -31% | Total revenue fell from $1,296.83M in Q4 2023 to $888.47M in Q4 2024 (-31% YoY), reflecting the ongoing effects of divestitures, reduced sales across key segments, and challenging market conditions that were already evident in previous periods. |
Operating Income (EBIT) | +25% | Operating income increased from $96.10M in Q4 2023 to $119.70M in Q4 2024 (+25% YoY), driven by strong cost control measures and operational improvements—continuing the momentum seen from earlier cost and supply chain initiatives, even as overall revenues declined. |
Net Income | Swing from +$77.94M to -$12.88M | Net income shifted from a positive $77.94M in Q4 2023 to a loss of $12.88M in Q4 2024, primarily due to a dramatic increase in non-operating expenses, especially a surge in depreciation and amortization, along with higher restructuring and likely tax adjustments reversing the prior period’s gains. |
Basic EPS | From $0.22 to -$0.04 (over 100% decline) | Basic EPS dropped from $0.22 in Q4 2023 to -$0.04 in Q4 2024, mirroring the net income swing; the increased burden from higher depreciation and amortization and other non-operating expenses significantly eroded earnings per share compared to the previous period. |
Depreciation and Amortization | +497% increase | Depreciation and amortization surged from $13.26M in Q4 2023 to $79.08M in Q4 2024 (nearly a 497% increase), largely due to the exclusion of discontinued operations in the previous period versus substantial asset impairments, write-downs, and remeasurement of the asset base in Q4 2024. |
Interest Expense | -33% | Interest expense fell by approximately 33%, from $69.69M in Q4 2023 to $46.50M in Q4 2024, reflecting a reduction in outstanding debt levels as part of improved capital structure management, even though a slight increase in the weighted average interest rate partly offset this benefit. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Sales | Q1 2025 | no prior guidance | Expected to increase 1% to approximately $750 million | no prior guidance |
Operating Profit | Q1 2025 | no prior guidance | Expected to increase nearly 30% over the prior year | no prior guidance |
Operating Margin | Q1 2025 | no prior guidance | Expected to expand approximately 190 basis points | no prior guidance |
EPS | Q1 2025 | no prior guidance | Expected to be approximately $0.02 (compared to a loss of $0.05 in Q1 2024) | no prior guidance |
Net Sales | FY 2025 | no prior guidance | Approximately $3.5 billion with about 1% growth on an organic constant currency basis | no prior guidance |
Operating Profit | FY 2025 | no prior guidance | Expected to increase approximately 10% | no prior guidance |
Operating Margin | FY 2025 | no prior guidance | Expected to expand approximately 125 basis points to 13.1% | no prior guidance |
EPS | FY 2025 | no prior guidance | Expected to increase more than 30% over the prior year | no prior guidance |
Operating Cash Flow | FY 2025 | no prior guidance | Expected to generate approximately $350 million | no prior guidance |
Leverage | FY 2025 | no prior guidance | Expected to decline to around 3x net debt-to-adjusted EBITDA by the end of 2025 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Sales | Q4 2024 | Approximately $900 million | $888,469 (thousands) | Missed |
Operating Profit | Q4 2024 | Expected to increase ~17% YOY to approximately $115 million | $119,700 (thousands) | Beat |
Operating Margin | Q4 2024 | Expected to expand by ~160 bps to 12.8% | 13.47% (119,700 / 888,469) | Beat |
EPS | Q4 2024 | Expected to increase by more than 130% to approximately $0.14 | -$0.04 | Missed |
Gross Margin | Q4 2024 | Expected to remain around 41.8% | 43.9% ((888,469 - 498,198) / 888,469) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Debt Reduction | Heavily emphasized in earlier periods with over $1B in paydowns, leverage dropping nearly 2 turns, and further reductions planned. | Not highlighted as a standalone topic in Q4 but remains integrated into improving financial health and shareholder returns. | Less explicit mention but still a key theme. |
Margin Expansion | Focused on improving gross and operating margins with structural cost savings and SKU optimization repeatedly noted. | Achieved a 580 bps YoY gross margin jump and 390 bps operating margin lift for 2024; expects further 125 bps operating margin expansion in 2025. | Consistent emphasis and robust confidence in continued gains. |
Product Innovation & Brand Investment | Continued pipeline of innovation (e.g., Maidenform, Bonds, Hanes Beefy-T) and 5% of sales spent on brand marketing throughout the year. | Emphasized scrubs, fleece, and Hanes Beefy-T 50th anniversary momentum; brand investment rate to remain at 5% of sales in 2025. | Ongoing focus driving sales and share gains. |
Champion Brand Separation & Sales Decline | Frequent updates on divestiture and its sales impact in earlier calls, including removing stranded costs and paying down debt. | In Q4, referenced Champion Japan as discontinued operations; minimal focus on prior quarter declines; shift to overall transformation impacts. | Less focus on decline specifics; separation mostly complete. |
Australia’s Performance | Cited as challenging but showing signs of recovery in wholesale, with impact from high interest rates. | Reported 4% YoY growth in Q4 but acknowledged sticky inflation and low GDP environment; introduced new products like Bonds Everyday Value. | Improving but still facing macro headwinds. |
Flat U.S. Sales Projection | No mention in earlier calls [—]. | Introduced a flat U.S. sales outlook on a constant currency basis for 2025, citing ongoing consumer pressures but stable retail relationships. | New topic signaling cautious U.S. forecast. |
CEO Stephen Bratspies’s Departure | No discussion in prior periods [—]. | Announced in Q4 as part of a planned and transparent succession process; CEO remains engaged to drive 2025 goals. | New development with leadership transition imminent. |
Retailer Inventory Reductions | Highlighted in Q1 as higher-than-expected actions affecting sales; subsequent mild references to cautious retail ordering. | Not mentioned in Q4, with no further updates on large-scale retailer inventory shifts. | No longer addressed despite earlier importance. |
Closure of Unprofitable Outlet Stores | Announced in Q2 to reduce low-volume, unprofitable locations, partly due to Champion separation. | Not discussed in subsequent calls, including Q4, with no new details provided. | Dropped from discussion after initial mention. |
15% Operating Margin Goal | Reiterated as a long-term ambition, with structural cost savings to drive margins beyond 15%. | Confirmed again in Q4, citing ongoing cost reductions, SG&A efficiencies, and improved mix; aims to reach 15%+ over time. | Consistently reaffirmed as a major strategic objective. |
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CEO's Planned Departure
Q: Why are you stepping down as CEO?
A: Stephen Bratspies explained that after nearly five years with the company , it was a natural time for a leadership transition. The company has a clear long-range plan and is well-positioned for sustainable growth, making it an opportune moment to implement the succession plan. He emphasized there are no issues with the business strategy and he remains fully engaged to drive strong growth and profitability in 2025. -
2025 Guidance and Margin Outlook
Q: What is your guidance for 2025 sales and margins?
A: The company expects about 1% year-over-year growth on a constant currency basis. In the U.S., sales are expected to be essentially flat, while international sales are projected to be up low single digits. Gross margin for the full year is anticipated to increase by 20 to 30 basis points , with an operating margin uplift expected in each quarter driven by SG&A cost reductions. -
Margin Expansion Plans
Q: How confident are you in achieving margin expansion toward the 15% target?
A: The company is very confident in its ability to expand margins. Operating margins were up 400 basis points in 2024, finishing the year with a gross margin over 44%. In 2025, they're guiding for an additional 125 basis points increase in operating margins, with incremental benefits from cost savings and SKU mix. They see 2025 as another big step toward the 15% plus operating margin goal over time. -
Cash Flow Guidance Components
Q: Can you explain the components of your cash flow guidance?
A: The company is guiding to $350 million in operating cash flow for 2025. This includes profit growth contributing over $40 million, lower cash interest by around $60 million, and approximately $75 million of nonrecurring costs from 2024 that won't repeat at the same level. There will be working capital benefits from inventory, accounts receivable, and accounts payable, though not to the same level as the $150 million benefit in 2024. -
Eliminating Champion Stranded Costs
Q: How far along are you in eliminating Champion stranded costs?
A: The company accelerated cost reduction actions in 2024 and is essentially completing the elimination of stranded costs associated with Champion this year. A significant part of the 125 basis points margin expansion guidance is due to getting these costs out. They expect to see the full run-rate effect beyond 2025, contributing to reaching the 15% plus operating margin target over time. -
International Sales Outlook
Q: What's your outlook for international sales, particularly Australia?
A: The company expects international sales to be up low single digits on a constant currency basis. In Australia, there was 4% growth in the fourth quarter, the first growth in a while. Despite challenges like sticky inflation and low GDP, the Australian business is performing well, driven by strong online sales and successful new product launches, such as the Bonds everyday value product. -
Gross Margin Cadence
Q: How should we think about gross margin progression throughout the year?
A: Gross margin is expected to be around 41.3% in the first quarter, up 125 basis points year-over-year. The first half should see more margin increase due to tailwinds from stabilizing input costs and cost savings. In the back half, the year-over-year benefit will slow down, partly due to a strong comparison with the 44.1% gross margin in Q4 of 2024. -
Printwear Business Opportunity
Q: Can you discuss the opportunity in the Printwear business?
A: While not a large part of the business, Printwear can be highly incremental. The company is focusing more on this segment with a new leadership team in place. The 50th anniversary of the Beefy-T is being well received, and Printwear is one of several growth drivers for next year. -
Impact of Potential Tariffs
Q: What is the potential impact of retaliatory tariffs on sales to Mexico and Canada?
A: There would be zero impact because the company doesn't move products that way. They do not sell products into Canada and Mexico from the U.S., so tariffs between these countries would not affect their operations. -
Consumer Trends and Channels
Q: Are you seeing shifts in consumer trends or channels?
A: The business follows macro channel trends closely. While not specifying performance by channel, the company notes that its performance is consistent with channels that are overperforming at a macro level.