Hanesbrands, the clothing company renowned for its brands like Champion and Hanes, witnessed a decline in sales during the third quarter of this year. The decrease in sales is attributable to several factors, including a slowdown in consumer spending in the US, US stores tightening their inventory, and inconsistent performance in certain Asian markets.

The company reported an overall 7% decrease in net sales from continuing operations, amounting to $1.67 billion when compared to the previous year. This decline includes a negative impact of $59 million due to foreign exchange rates. However, when considering constant currency, net sales only fell by 3%. While Hanesbrands highlighted the growth in innerwear sales in Australia and the Other Americas, as well as the growth of the Champion brand in Europe, these achievements were overshadowed by the challenges faced.

Sales of the global Champion brand specifically declined by 14% on a reported basis, with similar declines both in the US and international markets. When considering constant currency, the sales decline reduced to 9%. Growth in Europe and US collegiate channels were offset by weak consumer demand in the US, order cancellations resulting from late shipments due to US retailers managing their inventory tightly, and ongoing challenges related to the Covid pandemic in certain Asian markets.

The company’s gross profit also experienced a 20% decrease, leading to a gross margin of 33.7%, down from 39.1%. Adjusted gross profit, which excludes certain costs related to the Full Potential plan, amounted to $576 million, with an adjusted gross margin of 34.5%, down 460 basis points. Various near-term headwinds such as inflation in commodity and ocean freight costs, as well as manufacturing time-out costs due to inventory reduction efforts, contributed to the decline in gross profit. However, pricing actions, reduced use of air freight, and cost-saving initiatives partially mitigated these challenges.

Operating profit for the company declined from $235 million to $141 million, while adjusted operating profit fell to $168 million, a decrease of $96 million compared to the previous year. Income from continuing operations also declined to $80 million from $177 million.

Sales of innerwear declined by 11%, outweighing the benefits of a price increase and retail space gains. However, activewear sales remained relatively stable. While the collegiate channel and the printwear channel for Champion and Hanes brands saw growth, this growth was counteracted by declines in other channels due to lower point-of-sale trends and higher activewear inventory levels, particularly within Champion. Sales of the Champion brand within the activewear segment experienced a 9% decline, while sales of other activewear brands increased by 15%.

In terms of international sales, reported sales decreased by 6% due to unfavorable foreign exchange rates. However, on a constant currency basis, sales increased by 5%. Hanesbrands CEO, Steve Bratspies, acknowledged the challenging sales environment but expressed confidence in the company’s fundamentals, brands, and categories. He emphasized the company’s focus on controlling factors within its control, such as reducing SKUs and inventory, optimizing the global supply chain, and launching products targeted at younger consumers. Bratspies stated that the company is taking aggressive actions to navigate through the near-term challenges and execute its Full Potential strategy, positioning it for success when the macroenvironment stabilizes.

Looking forward, Hanesbrands has a pipeline of new products and innovations targeting younger consumers. This includes expanding the Hanes Originals product line and launching a seamless collection of bras and underwear within the Maidenform portfolio. The company expects these products to resonate with younger consumers and contribute to future sales growth.

For the fourth quarter, Hanesbrands projects net sales from continuing operations to be approximately $1.4 billion to $1.45 billion with a projected headwind of around $68 million from foreign currency exchange rate changes. This represents a 15% decline on a constant currency basis compared to the previous year. The company expects GAAP operating profit from continuing operations to range from $53 million to $83 million.

Despite facing significant challenges in the third quarter, Hanesbrands remains committed to its strategic initiatives and believes it is well-positioned for future success. By focusing on controlling internal factors and targeting younger consumers with innovative products, Hanesbrands aims to navigate through the current challenges and emerge stronger in the long run.

Useful links:
1. Hanesbrands Official Website
2. Champion Official Website